Search Results for: incentives to invest

Iain Marlow interviewed Blair Levin at this week’s IIC conference in Ottawa. Levin led the creation of the FCC’s National Broadband Plan prior to joining The Aspen Institute.

There are 3 audio clips available. 

In the first of these, I heard statements that inspired me to wonder if governments are doing enough as a role model for the adoption of digital technologies. Levin says:

… that the Government makes sure digital literacy is part of its overall culture…. Government is the single largest provider of education. It is the single largest provider of Public Safety. It is the single largest buyer of telco services. It is the single biggest deliverer of other government services such as social security or whatever.

Let me paraphrase: Is the government buying and delivering services in a way that stimulates the supply, adoption and use of digital technologies in the general marketplace?

Example: I can pay my federal small business taxes with no service charge if I personally go to a teller at the bank. On the other hand, I have to pay a $2 fee if I choose to pay on-line. Does this make sense? Shouldn’t the government be taking steps to discourage paper and incent digital transactions?

Another example: Ontario charges a “convenience fee” for renewing a license plate at a kiosk (presumably to avoid the inconvenience of facing a human?); how is this consistent with a digital innovation strategy? Imagine what would happen if the incentives worked the other way – lower cost automated delivery of services, increased use of ICTs, improved levels of comfort in interacting with digital technology. The “convenience fee” comes across as just another tax imposed without any strategic consideration of its impact on the adoption of digital delivery of government services.

What about the government’s purchasing of services?

Ontario’s ORION research network has announced that it is now extending the types of organizations that are using its connectivity to include the Hamilton Public Library. Is there still a need for privately operated “research” networks? If the most sophisticated network requirements continue to be peeled out of the public network domain, is there a reduced incentive for investment that could only be recovered from residential rates?

Government spending on communications requirements should be incorporated into a more strategic type of sourcing – helping to ensure that the general public benefits are considered. Embedding these advanced services requirements can serve to improve the economics of extending the geographic reach and enhanced capabilities delivered to all of us.

Enough ranting for today – I’ll save the issue of public safety ’til tomorrow.

Canada’s Industry Minister Tony Clement released a discussion paper and announced a national consultation on the digital economy. A welcome message from Industry Minister Clement describes this as being part of a bigger process toward developing a national action plan:

This consultation is the next step in developing the right environment for the greater adoption of digital technology. After it is complete, we take the results into account as we develop an action plan to address the digital issues facing Canada now and in the future.

In his remarks at the Canada 3.0 conference in Stratford, Minister Clement said:

Canada can and should be a leader in the global digital economy. Nothing prevents us from being the best place in which to invest, grow a digital business or create digital content for the world.

Now is the time for the private sector to step up. To contribute its ideas. And then, when the digital strategy is in place, implement the game plan.

I noticed that Statistics Canada released its 2009 Canadian Internet Use Survey yesterday as well. It has a few interesting observations that we can examine over the next little while. I suspect that the timing was not coincidental, especially given that the survey was sponsored by Industry Canada. Among the first things that caught my eye was the continued dominance of cable over wireline telephone company connections for broadband. Cable continues to be the choice of 52.9% of households while telco connections dropped from 38.5% in 2007 to 32.8% in 2009.

Many of the first user comments on the Digital Economy website focus on plumbing – the supply side of broadband. It seems to me that the conversation needs to get much broader.

People have talked about setting a moonshot vision for Canada in the digital world. As I wrote last month, the US didn’t put a man on the moon by setting a vision to build a Saturn V rocket.

The vision needs to be broader. As Minister Clement said, we need to look at “how best to encourage the greater adoption of digital technologies.” Demand side drivers, not just supply-side incentives. Ensuring leading edge infrastructure is a necessary, but not sufficient enabler of Canada’s global leadership. Adoption of ICTs, development and protection of content, skills. There are a range of issues to be explored.

Tuesday June 8 at The 2010 Canadian Telecom Summit will feature a number of sessions that examine these issues. Minister Clement will deliver the opening keynote address on June 7.

Have you registered yet? Download the complete conference brochure here [pdf, 1.2MB].

Interesting reading about broadband on the editorial pages of the major US papers this weekend.

The Sunday NY Times had an OpEd penned by Yochai Benkler, principal author of the largely ignored Berkman Center comparative study of international broadband performance [as we wrote a few weeks ago, University of Calgary’s Dean of Business observed that the study was rebutted by economists with extensive practical experience of telecommunications regulation]. The FCC’s National Broadband Plan had only one footnote that referred to the Berkman Center’s report. Out of all the work done by the Harvard researchers, the only observation that appeared to merit a reference was:

Some international comparisons suggest the number of retail broadband providers may be positively correlated with advertised download speeds, at least at the high end of the market, and with affordability.

And the FCC quickly followed up with:

Others rank the United States high in affordability of broadband, despite the fact that 96% of consumers have two or fewer choices, and suggest that consumers may not be willing to pay as much for high speeds as they are for other functionality.

Since the FCC report had only one reference to the Berkman study, the OpEd tries to cut out the middleman – selling to the public what he could not get the FCC to buy into.

after eight years of intense litigation and lobbying from telephone companies, the Federal Communications Commission gave in, deciding that competition between one telephone incumbent and one cable incumbent was enough — in essence, it rejected open access as a way to create competition.

Benkler misses the point. Open access is used outside of North America because in most countries, there is nothing close to the nearly ubiquitous intermodal competition that we have in Canada and the US. This model of “open access” won’t create the benefits of increasing competition and investment when competition already exists.

No matter how many times we hear the populist mantra of a cable and telco “monopoly,” the vast majority of North Americans already have access to choice; multiple facilities-based choices enabled over twisted pair, coax, fibre, fixed and mobile wireless, satellite. Multiple service providers offer consumers choices over many of these facilities.

A recent paper by Catherine Middleton, Canada Research Chair – Communication Technologies in the Information Society at Ryerson University’s Ted Rogers School of Management, observes that Canada has about 500 internet service providers, less than 10% of which are incumbents. The paper discusses the problem with many open access models, with regulators manipulating the market:

It is therefore no surprise that despite being considered as a ‘‘second-best” alternative, unbundling policies have been implemented to introduce service-based competition into broadband markets in 29 of the 30 OECD markets.

However, paradoxically, service-based competition also bears the risk of actually deterring facilities-based competition and further innovation and investment in the existing single infrastructure: with the incumbent providing attractive access provisions (e.g. relatively low prices for unbundled loops), incentives for a new provider to roll out new infrastructure are diminished.

Also on Sunday, the Washington Post carried an editorial talking about the FCC’s National Broadband Plan as being “longer on aspiration than specific policy intentions.”

broadband networks have been built with billions of dollars from companies in the private sector with a legitimate right to extract profit from well-placed investments. These initiatives — and yes, the profit motive — have resulted in remarkable leaps in a few short years.

Broadband service is hardly a monopoly marketplace. And as the Post observed, “it is hard to see in this field the signs of gross market failure.”

Many of the “digirati” tweeted and provided links to the NY Times piece. Virtually none have linked to the Washington Post. Perhaps the Post’s message didn’t resonate as well with those arguing for increased regulation of the internet, but why are they afraid of sharing it with their disciples?

Verizon’s policy blog had an entry last week that I think is as relevant in Canada as it is for Verizon’s US readers. Kathy Grillo writes:

We all share the same ultimate objective: to ensure that broadband helps all Americans reach their full potential, while addressing important social challenges, providing the foundation for job creation and economic growth and, of course, giving consumers the opportunity to choose their own Internet experience.

The challenge is not in reaching a consensus on the objective; it is a question of how we get there.

Sound familiar?

Verizon sets out five elements to stimulate broadband deployment and increase consumer choice:

1. encourage demand by increasing computer ownership, computer skills, digital literacy, and online education;
2. incent new uses of the Internet that serve societal needs, such as energy savings, improved education, public safety and better and less expensive healthcare;
3. encourage continued innovation and investment to increase the options in networks, services, devices and applications;
4. recognize and encourage wireless broadband platforms as important in reaching unserved and rural areas through more efficient tower-siting processes and the identification of additional spectrum;
5. government intervention must be technology-neutral and must put choice in the hands of consumers, rather than subsidizing providers directly, targeted precisely to the needed effort.

The end-user direct subsidy approach is one that I have written about over the past few years, including our opening remarks at The 2008 Canadian Telecom Summit, nearly two years ago.

How will Canada approach extensions to the evolution of our digital strategy? Will tomorrow’s Throne speech provide guidance? If there are no new initiatives to be funded, as suggested by John Ivison of the National Post, how will the government provide appropriate incentives for the private sector to carry the torch?

A flood of documents arrived in my email late yesterday, with parties filing their comments in response to the seventh amendment to Telecom Notice of Consultation 2009-261.

The filings should be available on the CRTC website in the next couple days.

In the meantime, here are some highlights.

From TELUS [para. 12]:

While new investment is completely in line with macro-economic policy, unbundling is not. In fact unbundling actually increases the risk of investing in facilities that are required to compete with the market leader in broadband and broadcast distribution. Unbundling is an absurd proposition at best if the goal is to promote competition.

From Bell [para. 19]:

In the end, the trade-off faced by the Commission can be summarized as follows: is it better to mandate access to NGNs and depress investment, in the hope of spurring some hybrid or resale competition in those limited well-served areas where each of cable, ILEC and wireless providers will have built high-speed broadband networks, at the expense of competition in “lost” areas, or is it better to not impose regulatory measures and let ILECs invest as much as market forces allow, in order to provide as many Canadians and communities as possible with the benefits of competition from at least three competing facilities-based networks?

From Rogers and the major cable carriers [para. ES14]

The international evidence points to some risk that wholesale access requirements would have a negative impact on incentives for investment by facilities-based broadband service providers. A review of the literature provides no strong evidence that the benefits would be sufficient to outweigh this risk.

From MTS Allstream [para. E3]:

Based on the U.S. experience, withdrawal of regulated wholesale services is more likely to discourage investment than to stimulate it. In contrast to the existing situation in the U.S., in Europe it is recognized that replication of existing infrastructures is neither practical nor desirable, even in densely populated areas, and that unbundling networks and providing wholesale access is a proven enabler of both competition and investment.

Surprisingly, the Canadian Association of Internet Providers had no comments. Their two page submission consisted of a restatement of the subjects upon which CRTC was seeking comments and a statement that the Competitors “look forward to reviewing the submissions of interested parties.” Considering the association’s declaration of importance of this issue, it is somewhat surprising that there was no substance to its filing, no evidence filed to address the question that seemed to be crying out for input from CAIP et al.

At paragraph 11.B.b, the notice asked for evidence to support or counter:

whether, in the absence of the speed-matching requirement and the mandated provision of the high-speed access services under consideration, there would be competition sufficient to protect the interests of users;

This point seems crucial for the various appeals that were mounted by CAIP over the past year. It seems bizarre that the Competitors wouldn’t put forward evidence to address this point. They need to do more than just look forward to reviewing other submissions. CAIP and the Competitors should have put forward a strong case and prepare to defend it.

---

Update [February 9, 7:15 am]
Teksavvy filed a complete set of comments, with supplementary expert evidence, including a literature review that could result in the CRTC being the first quasi-judicial body to pronounce upon the Harvard Berkman study that was released last October [see our many posts such as here, here and here, describing critiques of that piece]. Most importantly, there is a paragraph in Teksavvy’s submission that begs the question of why its evidence wasn’t filed by the CAIP coalition.

TSI notes that the competitive sector is not in good health. Evidence of this is demonstrable through the reduction that has occurred in recent years in the number of competitors participating in the regulatory process and the reduced vigour of the participation of those who are left. The result has been that TSI has had to expend considerable resources in order to ensure that competition does not die, and with it, TSI itself. This is a big burden for one competitor to bear, and it is not a burden that can be sustained indefinitely.