Search Results for: incentives to invest

“The Government will encourage more private sector competition and investment in services that have become essential in a digital economy.” That is a quote from the letter of welcome sent to CRTC Chair Ian Scott last week by Heritage Minister Melanie Joly and Minister of Innovation, Science and Economic Development Navdeep Bains.

“All Canadians and Canadian businesses deserve high quality telecommunications services at affordable prices.” How do you increase competition to drive “affordable” service prices while simultaneously encouraging investment?

It is a delicate balance. How do we define and measure “affordable”? We all want lower prices for everything, other than our own wages, but when you add the modifier “high quality” to the product definition, it gets more difficult to implement.

What is the right way to increase competition? What is the right level of competition that provides pricing discipline, encourages innovation, and maintains the right incentives for continued investment in infrastructure?

A recent article by Rita Trichur in the Globe and Mail starts by saying

The three-year contract is dead, but monthly bills keep rising. Switching carriers is a nightmare, add-on charges multiply like cockroaches, and being off contract doesn’t guarantee that you’ll find a substantially better deal if you shop around.

Many blame the CRTC. The regulator has tinkered with the rules, but it has largely failed to keep major carriers in check.

Yes. Monthly bills went up precisely because the three year contract is dead, just as the CRTC was warned. The CRTC banning innovative pricing plans like zero rating also has led to less price competition and discouraging product differentiation. In the case of Videotron’s Unlimited Music, the CRTC prohibited a service innovation by a new entrant and denied consumers a chance to save.

On one hand, we want consumers to have more choice, on the other hand certain groups want the only competition to be on the basis of price. If a service provider doesn’t have market power, do we really need to regulate its services and products?

Two sides to every coin.

The issue of spectrum set asides is another one that is more complicated than the average soundbite portrays. On one hand, the new entrants want access to more spectrum in the lower frequency bands, as noted by Christine Dobby in her recent article, which is why they are seeking a set-aside in the 600 MHz auction. On the other hand, Canada’s new entrants in the mobile wireless sector are not start-ups; they are multi-billion dollar vertically integrated communications giants – Shaw and Quebecor.

Quebecor’s Videotron Ltd. now has 16 per cent of wireless subscribers in the province and, after wrapping up expensive investments in building an LTE network, the business now makes a healthy contribution to the telecom division’s free cash flow, which increased by almost $100-million in the first half of this year to $399.5-million.

While Quebecor CEO Pierre Karl Péladeau told The Globe and Mail that Rogers, Bell and TELUS “received swaths of low-band spectrum from the government at no charge when they first set up their cellular networks in the 1980s”, the other side of that issue is that the incumbents have been paying annual license fees for that “free” spectrum. In total, the three companies have paid more than three and a half billion dollars in license fees, with a present value of more than $8.5B in 2017 dollars. This is hardly swaths of spectrum for “no charge”.

Under such considerations, should we still have spectrum set-aside for “new entrants” in the upcoming auction? Is it noteworthy that just last week, Mr. Péladeau criticized a two-tier system for Canadian content obligations, saying it “is blatantly unjust.”

Two sides to every coin.

High quality services at affordable prices creates a difficult tension in implementing communications policy.

What is affordable for some is different than what is considered affordable for others. As I have written before, perhaps our focus should be looking at the issue of affordability by “Looking at who, not just where.”

That would require increased product and service flexibility and the ability for service providers to differentiate themselves. Do we really expect increased competition to emerge from heavy handed government regulation?

FCC Chairman Ajit Pai was unable to make it to Toronto for The 2017 Canadian Telecom Summit, but he sent a special video message, addressing the conference’s themes of Competition, Innovation and Investment and what the FCC is doing to promote each.

Greetings from Washington, DC, and thank you for this opportunity to address The 2017 Canadian Telecom Summit.

I’m sorry that I cannot be there in person. Mark Goldberg feels like a kindred spirit to me. He’s from Parsons, Kansas and moved to Toronto; I lived in Toronto and eventually moved to Parsons. And the last time I attended, I had the pleasure of listening to and learning from my good friend, former CRTC Commissioner Raj Shoan.

Let me begin by thanking our Canadian counterparts for your long standing friendship and collaboration on telecom issues. Our recent incentive auction is just the latest example. We jointly developed a uniform North American band plan for UHF TV signals and the new 600 MHz wireless band, paving the way for cross-border inter-operability of devices and networks. I look forward to continuing to work together to craft solutions that benefit Americans and Canadians alike.

Now, I see that the theme for this year’s Summit is Competition, Innovation and Investment, so I will take the radical step of talking about Competition, Innovation and Investment and what the FCC is doing to promote each.

Let me start with innovation. We begin with the premise that breakthrough advances are going to come from private sector entrepreneurs, not government policy makers. We want to empower inventors to bring their ideas to life. Now often that just means getting government out of the way. That also means promoting competitive markets and providing key inputs, like spectrum, that aid the incentives to create.

So, what exactly are we doing? For starters, we are reviewing the FCC’s rules across the board, from media to wireline, and deciding which ones still make sense in the digital age. As part of this review we are asking whether the costs of a rule outweigh the benefits. When the facts warrant, we won’t hesitate to revise overly burdensome rules or repeal them altogether. We’ve also put in place a process to ensure that, if an innovator seeks FCC approval of a new technology or service, we’ll make a decision within one year. That’s light-speed in our world.

We also began the process of allowing television broadcasters to use the next generation TV standard, ATSC 3.0, on a voluntary market-driven basis. This standard, which marries the best features of broadcasting and the internet, would allow broadcasters to fully enter the digital era.

On the spectrum front, we moved quickly to open up nearly 11 GHz of spectrum in the bands above 24 GHz for mobile use. This gives operators a clear path to launching 5G and other innovative millimeter wave services in the United States. And we’re currently considering opening up even more of this spectrum.

Now, as we move to 5G, regulators also must recognize something many people often don’t. Innovation isn’t limited to the so-called edge of networks. Innovation within networks is also critical, especially in the mobile space. To realize the digital future, we need smart infrastructure, not dumb pipes.

And that brings me to investment. For almost two decades, the FCC pursued a light touch approach to regulation, one that produced tremendous investment and innovation throughout our entire internet ecosystem, from the core of our networks to providers at the edge. But two years ago, the US Government’s approach suddenly changed. The FCC, on a party-line vote, decided to slap an old regulatory framework, called Title II (after the section of our statute where the rules are found) originally designed in the 1930’s for the Ma Bell telephone monopoly, upon thousands of internet service providers, big and small.

We’ve already begun to see the harms from this shift to more heavy-handed regulation. From 2014 to 2016, the broadband infrastructure investment in the United States dropped, the first decline ever, outside of a recession. Last month, the FCC voted to initiate a process to reverse the Title II decision and seek public input on how to secure the Open Internet that we all favour. I enter this process with an open mind, and we will go where the facts lead us, but I’m confident that this move puts us on the path to more broadband infrastructure investment, which would mean more Americans with high-speed internet access, more jobs building those networks, and more competition, the third topic that I wanted to discuss.

When it comes to competition, small ISPs are critical to meeting consumers hope for a more vibrant broadband marketplace and closing the digital divide. But the simple reality is that the smallest providers simply don’t have the means or the margins to withstand the Title II regulatory onslaught. Now, since we launched our proceeding, 22 small ISPs, each of which has about 1,000 broadband customers or fewer, told the FCC that the Title II order and utility-style regulation had affected their ability to obtain financing. They said that it had slowed, if not halted, the development and deployment of innovative new offerings, which would benefit our customers. And they said that Title II hung like a black cloud over their businesses.

In my first week as Chairman of the FCC, I proposed to relieve small ISPs from costly and overly burdensome reporting requirements associated with the Title II order. Reversing that Title II order altogether would encourage smaller competitors to enter the broadband marketplace or expand their networks. This would mean more competitive choices for the American people.

In short, America’s approach to broadband policy will be practical, not ideological. We’ll embrace what works, and dispense with what doesn’t. That means removing barriers to innovation and investment, instead of creating new ones. That means taking targeted action to address real problems in the marketplace, instead of imposing broad preemptive regulations. And that means respecting principles of economics, physics and law, and acting with humility as we regulate one of the most dynamic marketplaces history has ever known. This vision will unleash the massive investments that the digital world demands.

I am proud to reaffirm my nation’s commitment to promoting more competition, innovation and investment.

And I look forward to working with all of you to bring the benefits of the digital revolution to the people of Canada and the United States.

Thank you very much.

Yesterday’s approvals of Bell’s acquisition of MTS came with a plot twist that few anticipated. As a condition of government approval of the deal, 40 MHz of spectrum (in the AWS-1, 700 MHZ and 2500 MHz bands) is being transfered to Xplornet, Canada’s largest rural internet service provider, giving birth to a new entrant in the Manitoba market. Xplornet is also getting certain other incentives (under the terms of a consent agreement with the Competition Tribunal) to help it launch, including nearly 25,000 customers, retail stores, discounted advertising rates and expedited access to network infrastructure. Additional Bell/MTS customers will be able to switch to Xplornet without any termination fee (including not having to pay off the remaining device subsidy), serving as an incentive for Xplornet to launch quickly in the province.

The structure of the overall deal includes other measures that help ensure Manitoba will continue to have multiple carriers investing in building and upgrading networks and consumers will continue to have access to multiple brands.

The other interesting twist is found by looking at which network network infrastructure will carry each service provider’s traffic. Up until not, Bell and TELUS have shared use of TELUS infrastructure; going forward, Bell’s 90,000 subscribers in Manitoba will migrate to the MTS network which is also being shared with Rogers under the terms of a long term Network Operating Agreement. The TELUS network utilization is being restored through the transfer of 110,000 customers under the terms of the deal.

The deal brings a change in market dynamics as Bell moves from 4th to first place in Manitoba along with a commitment to maintain current pricing offers for at least one year. Perhaps with an eye toward Manitoba’s western neighbour, statements from the Competition Bureau also signal how similar deals might need to be structured to gain regulatory approval.

With all of its focus on wireless, it is disappointing that the government didn’t get a commitment from the companies to launch a broadband service to target low-income households in the province – or even to impose the condition across Bell’s entire service footprint. Low income services have been launched by TELUS and Rogers in their respective wireline serving areas. Unfortunately, neither the CRTC nor Innovation, Science & Economic Development used their approval process to get such an important service to be offered by Bell in Manitoba, Quebec or those parts of Atlantic Canada not already being served by Rogers.

As I said on Monday, “Set clear objectives. Align activities with the achievement of those objectives. Stop doing things that are contrary to the objectives. That takes leadership, not money.”

Unfortunately, this was another missed leadership opportunity for the government to bridge a gap in digital adoption, without spending any additional taxpayer money.

One of the best features of summer is the (almost) guiltless attitude to indulging in an occasional ice cream treat. In the area of my summer office, we have access to a few shops that feature more than 3 dozen varieties of Kawartha Dairy’s ice cream. Despite the availability of more modern flavours, such as Salty Caramel Truffle or Crème Brûlée, I like the nostalgia of Tiger (orange ice cream with a black licorice swirl) combined with Creamy Orange.

I have used the ice cream metaphor a number of times on this blog. The first time may have been 8 years ago in reference to net neutrality, where I also invoked the imagery of the movie Pleasantville.

For all the talk of ensuring that networks will enable the creation of the next Facebook or Google, it is possible, perhaps likely, that calls to impose increased regulations, restricting services innovations, are going to have the opposite effect.

Canada led the world in actually creating regulations that give effect to net neutrality when the CRTC created its rules governing the internet traffic management practices of Canada’s internet services providers.

Mobile TV has been under examination by the CRTC to see if rules are being broken because people can’t get open internet video streaming for the same effective cost per megabyte as packaged mobile video. Frankly, my initial reaction would be to respond that mobile carriers marketing departments should be free to choose whatever products they want to offer. Some service providers only offer voice and text. Isn’t it up to the service provider to decide whether they offer data and at what speeds?

If you want open internet, here is the price per megabit per second and here are the terms and conditions. If you don’t accept those conditions, please feel free to find another service provider.

We don’t mandate that ice cream stores offer tiger ice cream – although maybe we should – nor do we limit them from offering more than vanilla flavour. We don’t even require them to offer vanilla.

As hard as it may be for some people to imagine, there really is a segment of the market that doesn’t want high speed open internet from their service provider. They may only want email. Others may want email and specific popular messaging. Some may want access to Facebook. Rather than having to take a $25-30 open data package, shouldn’t the service provider be able to target market segments based on specific applications? Might this get more people to get introduced to mobile digital services?

The government has continuously focused on supply side incentives for its digital strategy, funding infrastructure and avoiding the issue of demand side incentives. Although I have written about the need for Canada to help with targeted programs for low income Canadians, it has been the private sector that has done the best job segmenting the market and finding ways to launch services to get more customers.

It makes sense. It is self serving for the service providers to seek incremental growth. That is a good thing. Rather than discourage growth and investment, perhaps the focus of policy should be in encouraging that growth in targeted markets – such as services for disadvantaged Canadians or segments that have not yet gone on-line.

Arbitragers may want to have access to targeted service innovations; demanding equal access to the prices being offered for a different service. We have seen claims that some wireless carriers are taking advantage of their vertical integration, being affiliated with broadcasters or cable companies.

I might respond: “then switch suppliers”. Go across the street. The CRTC already made it easier to switch companies. If you don’t like the way your current company packages its bits and bytes, leave them.

I just don’t want to see central control of what flavours of services we can create through innovation, or examining the cost base for those services. If I wanted to add salty caramel truffles to my vanilla ice cream, it would cost a whole lot more than just getting the pre-mixed version. Should the dairy board be investigating why my ice cream shop charges the same price per scoop for truffle packed ice cream as it does for plain vanilla?

I doubt I would ever find tiger ice cream if my local shops needed to get bureaucratic approval.

The digital economy framework shouldn’t block service innovation and differentiation.

Facebook CEO Mark Zuckerberg recently wrote in the Wall Street Journal that connecting everyone on the planet to the web can create opportunity and reduce poverty. It sets out a noble vision and it is an article worth reading.

Sometimes, I am left with a feeling of concern for Canada’s ability to lead in the digital economy.

It has nothing to do with our abilities to be creative, innovative, entrepreneurial, faster-to-market or any other characteristic.

It isn’t even a matter of government incentives. Indeed, if anything, my concern is that our government may sometimes be too eager to intrude.

Digital Canada 150 – Canada’s national digital strategy – is the product of three years of examination of thousands of pages of feedback following an extensive consultation process. The consultation sought input on 26 issues caught under 6 broad headings. Of the 26 pages in the pdf version of Digital Canada 150, 5 pages are the cover, printer notes, table of contents and letters from the Prime Minister and Industry Minister.

Europe released a digital scorecard looking at where it stands on targets in its digital agenda. What does Canada’s scorecard look like?

In the past week or so, the government announced it was moving forward on its Connecting Canadians program to spend nearly a third of a billion dollars to try to stimulate investment by ISPs to enable uninspiring broadband speeds to be available to rural and remote communities:

Over 99 percent of Canadian households currently have access to basic Internet with speeds of 1.5 Mbps, but newer online technologies typically require faster speeds and higher data transfer rates. Through Connecting Canadians, the government will boost speeds to 5 Mbps for up to 98 percent of Canadians.

Earlier today, Xplornet announced that it will beat those targets, offering 5 times the speed to all Canadian households:

CRTC and Industry Canada have forged a vision and an action plan to ensure all Canadians have equal access to high speed broadband. Xplornet has embraced this vision and is executing a plan to provide customers outside big cities with the most attractive Internet experience that technology can provide. Xplornet has started rolling out a new Long Term Evolution (LTE) fixed-wireless network this year and will activate two state of the art next generation satellites in 2016 with the aim of making 25 Mbps broadband service available at affordable prices to 100% of Canadian homes and businesses outside of the big urban cities.

Over the past year, I have written a number of pieces (such as “Measuring success” and “Inconsistent messages; predictable turmoil” and “Building a digital economy dashboard“) that call for the government to provide clear, measurable objectives for our digital policy agenda.

Two of the questions in the Digital Economy Strategy consultation asked by the government itself were directly related to this:

Improving Canada’s Digital Advantage

• Should we set targets for our made-in-Canada digital strategy? And if so, what should those targets be?
• What should the timelines be to reach these targets?

I have said it a number of times. “Set clear objectives. Align activities with the achievement of those objectives. Stop doing things that are contrary to the objectives.”

It is encouraging to see the Connecting Canadians program begin with a data gathering process. To get where you want to go, it helps to know where you are starting from.

Last week, the CRTC recognized the wide disparity in internet adoption rates based on income among Canadians:

The use of the Internet by individuals in households in the lowest income quartile continues to lag, at 62%, compared with 95% of individuals living in households in the highest income quartile.

It has been too easy for the government to focus on programs to stimulate the supply of internet. We need to examine programs that look at demand – increasing computer ownership and broadband adoption among low income households, especially in homes with school aged children.

Canada’s digital future depends on such inclusiveness and opportunity for all.