Search Results for: incentives

As the CRTC begins its “Review of basic telecommunications services“, FCC Commissioner Ajit Pai has a warning that should be considered. Writing in the National Review, he warns that a “fraud-friendly” Lifeline service has led to rising taxes and fees on consumer phone bills:

In 1993, humorist P. J. O’Rourke said, “If you think health care is expensive now, wait until you see what it costs when it’s free.” More than 20 years later, a similar thought comes to mind in looking at the Federal Communications Commission’s Lifeline program.

Commissioner Pai hails from my home town of Parsons, Kansas (a previously unrecognized spawning ground for telecom policy professionals) and he writes waste, fraud, and abuse that plague the current Lifeline program in the US, “known in some circles as ‘Obamaphone'”.

Commissioner Pai makes some recommendations for fixing Lifeline, which he says “must go hand in hand with any decision to begin providing broadband subsidies through Lifeline.”

Lifeline needs to be placed on a budget. It is now the only FCC program of its kind without a cap on spending. A Lifeline budget will increase incentives to eliminate fraud and prevent future out-of-control spending.

We should also prohibit carriers from giving away free phone service to Lifeline recipients. When the program was created 30 years ago, it offered low-income Americans discounted service, not free service. But recently, the program has lost its way. Requiring recipients to have some skin in the game will not only discourage waste, fraud, and abuse. It will also restore the program to its original purpose: providing a hand up, not a handout.

Commissioner Pai warns against expanding the current “broken program” to include broadband service, without first fixing the problems that burden consumers with wasteful costs.

As Canada prepares to consider expanding the definition of basic service to include broadband, any subsidy scheme should consider the experience in other jurisdictions. Start by reading the article, “What Those Rising Taxes on Your Phone Bill Pay For: A Fraud-Friendly ‘Obamaphone’ Program.”

Providing broadband in rural and remote areas isn’t easy. If it was easy, we wouldn’t have needed billions of dollars of government incentives directed to improve access over the past decade.

It comes down to economics. On a per customer basis, it is costlier to connect rural homes and distances mean that it can take longer to install and service these connections.

No single technology can be relied upon to deliver broadband internet to everyone. The biggest challenge is in delivering service in markets with extremely low household density.

For wireline based services, there is the cost of running cable. With the greater distances between rural households, these long cable runs – with costs measured in dollars per foot – can lead to initial placement costs that simply cannot be recovered from monthly service fees. And that assumes the distances even permit a broadband connection. For many households in rural markets, a wireline connection simply isn’t practical.

When wires aren’t economic, fixed and mobile wireless can be effective if there are enough households within the reach of the base station. These solutions use spectrum; more customers and higher speed services need more spectrum. That is why reports about this week’s results from the 2500 MHz spectrum auction have referred to rural consumers being the big winners.

But there are still some residences that cannot be served by conventional wireless technologies and the only viable solution available today is satellite. New fourth generation satellites are able to provide broadband speeds that can deliver two-way video calling and streaming media. While there is a longer latency – it takes a quarter second for a signal to go up and down to a geo-stationary satellite – satellites enable broadband connections for households that are beyond the reach of terrestrial technologies.

Other countries have recognized the role of satellites in providing broadband access for rural markets. Despite massive levels of government subsidy, satellite and fixed-wireless are part of the solution for universal broadband in Australia and even the UK.

In February, I wrote about the common misinformation about Australia’s NBN as a universal fibre to the home initiative. Last year, I wrote about an interim report from Australia that showed that after spending more than $7B, only 260,000 premises had access to fibre with only 78,000 subscribers – a cost to taxpayers of nearly $100,000 each. In the UK, despite far greater population density compared to Canada, “Superfast Broadband” includes satellite for rural markets: “The Government will be working with local projects and suppliers to launch a scheme which will offer people with less than 2Mbps broadband services the option of taking up superfast capable satellite service”.

One technology simply doesn’t fit every application.

On June 3, Xplornet President and CEO Allison Lenehan will be talking about delivering advanced services to rural Canadians at The 2015 Canadian Telecom Summit.

Have you registered yet?

Is there really a difference between charging $2 for a paper bill and providing a $2 discount to those who opt for electronic billing?

In the minds of parliamentarians there is.

Either way, consumers who opt for e-billing pay $2 less than those who still get a paper bill.

But proposed legislation only bans the explicit paper charge, not the e-billing discount. The Broadcast Act is proposed to be amended with:

34.1 No person who carries on a broadcasting undertaking shall charge a subscriber for providing the subscriber with a paper bill.

The Telecom Act is proposed to have a similar amendment, covering telecom services providers, wireless and wireline and including internet service providers. large and small:

27.2 Any person who provides telecommunications services shall not charge a subscriber for providing the subscriber with a paper bill.

These are amendments to the Acts with questionable value for consumers. There are two ways around the proposed law. One is to raise the base price for everyone and then provide a discount for the e-billing customers. The other is for the company to simply not offer paper billing as an option. How many internet service providers or new entrant companies offer only e-billing options?

My member of parliament started a Twitter defense of the new legislation even before the omnibus bill was introduced:

He was concerned about seniors and low income Canadians who may not have digital skills or even on-line capabilities. My regular readers know that I share concerns about the failure in leadership to deal with digital literacy and connectivity for disadvantaged groups.

But the reality is that the industry already indicated that it would look after these groups.

The CRTC held a meeting on August 28 to try to get industry wide consensus on such charges for paper bills – in effect, trying to get a competitive industry to collude on whether they would all agree on charges to consumers. The CRTC Vice-Chairs reported:

those companies that charge paper bill fees have agreed to provide exemptions for customers who have no personal or home broadband connection, persons with disabilities who need a paper bill, seniors aged 65 and over and veterans of the Canadian Armed Forces.

So – there goes that rationale for the legislation.

In the meantime, we know that incentives for e-billing lead to dramatically higher adoption of such services. One would have thought that the government would have wanted to encourage the adoption of e-billing. Once again, we see a failure to maintain consistency with a national digital agenda. As I wrote before (in “Don’t do stupid stuff“):

Increasingly, it appears that Canada needs a digital conscience in Ottawa to teach the Obama doctrine: stop doing stupid stuff.

Threatening to introduce legislation to ban charges for paper bills is another in a growing list of actions that are at cross purposes with achieving policy objectives.

I have also written in the past: “it has sometimes been difficult to determine what the government would like to achieve.” It should be simple: Set clear objectives. Align activities with the achievement of those objectives. Stop doing things that are contrary to the objectives.

Years from now, will people look back at the proposed paper billing law and put it in the category of Canada’s Criminal Code ban on crime comics and other strange artifacts of a different era?

Prior to yesterday’s scary admission that there is no strategy to deal with ISIS, US President Obama’s foreign policy was said to be guided by a policy of “Don’t do stupid stuff“, the phrase having been cleaned up for prime-time viewing.

Increasingly, it appears that Canada needs a digital conscience in Ottawa to teach the Obama doctrine: stop doing stupid stuff.

Threatening to introduce legislation to ban charges for paper bills is another in a growing list of actions that are at cross purposes with achieving policy objectives.

According to the Digital Canada 150 strategy,

Digital Canada 150 represents a comprehensive approach to ensuring Canada can take full advantage of the opportunities of the digital age. It envisions a country of connected citizens armed with the skills they need to succeed.

The Government plays a key role in ensuring that consumers are protected and action is taken to end price discrimination. We have introduced measures to protect Canadians and their families while encouraging healthy competition and lower consumer prices.

By Canada’s 150th birthday in 2017, our vision is for a thriving digital Canada, underscored by five key pillars: connecting Canadians, protecting Canadians, economic opportunities, digital government and Canadian content.

As I wrote Thursday, in 2006, a Directive was sent to the CRTC [Order Issuing a Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives]. At that time, Canada’s cabinet called for the CRTC to “rely on market forces to the maximum extent feasible as the means of achieving the telecommunications policy objectives, and when relying on regulation, use measures that are efficient and proportionate to their purpose and that interfere with the operation of competitive market forces to the minimum extent necessary to meet the policy objectives.”

Yesterday, the broadcasting and telecom vice-chairs of the CRTC convened a closed door meeting of telephone and cable company executives, representing Bell, Bragg Communications (Eastlink), Cogeco, Globalive (WIND Mobile), MTS Allstream, Rogers, Sasktel, Shaw, TELUS and Videotron. The agenda for the meeting called for discussion on “a clear and predictable approach to fees for paper bills”, examination of “Specific Circumstances: disability / income level / seniors / others”, but the agenda did not say that the CRTC sought elimination of the charges altogether.

So it is not clear why the CRTC chair was disappointed at the outcome: “While the companies agreed to adopt consistent exemptions to such fees, they were unable to reach a consensus to eliminate them entirely.”

The Industry Minister was quick to announce action:

Canadians should ask “why?”

The companies already agreed to provide exemptions for Canadians with disabilities, customers who don’t have broadband, seniors and veterans. At least half of low income Canadians are already captured in those exemptions because the government has yet to deal with embarrassingly low adoption of computers and broadband for that segment.

So what is the problem we are trying to fix?

Why would we discourage incentives for Canadians to adopt digital billing? Why would we disadvantage Canadian companies that will spend millions of dollars sending bills? Why would we introduce legislation that will raise the cost of doing business – costs that are certain to cost Canadians.

I wrote yesterday about “Roadblocks for an innovation economy.” Legislation to mandate no-charge paper bills in a competitive environment is yet another one of those roadblocks.

How many roadblocks would be removed if we could get the government’s digital strategy simplified to mirror Obama’s doctrine?

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.