Search Results for: calvin

Regular readers know that I am not a fan of the ever changing rules for the Canadian wireless sector. I have called it a Calvinball approach on more than one occasion. Policy makers just seem to be making it up as we go, reacting instead of leading.

In April, Minister Moore said, “I wish we had moved on this file, on the roaming fees, much sooner, because it actually may have had a material impact on the scene right now in Canada’s wireless world.”

The fact is that all of these issues have been considered numerous times in public consultations associated with the wireless framework. The Minister’s regret is a powerful statement – one that may come under consideration in the litigation over the collapse of Mobilicity.

Agree with the need for intervention or not, legislative changes on roaming fees may be another example of half measures that might have benefited from a more complete review, had the enabling legislation not been buried in the middle of a budget implementation bill. For example, the roaming rates established by the legislation did not contemplate new entrant subscribers making out-of-country long distance calls. How would that impact overall consumer wireless rates?

But, as described in an article in the Globe and Mail on Monday, it isn’t just the wireless telecom world that sees on-the-fly policy making. Broadcasting regulation is now also being subjected to political interference.

In a speech delivered last Monday, the Prime Minister said his government was helping Canadians by letting them pay only for the channels they want, and stated he would oppose any “tax” on services such as Netflix and YouTube. Those are popular positions, which is presumably why an election-ready Harper is taking them without first letting the CRTC finish its work. But they are also self-contradictory, and based on ignorance of the TV business.

Next week, the CRTC will open the oral hearing phase of its review of wholesale mobile wireless services proceeding, perhaps exploring what other improvements can be made to the competitive wireless sector. Will tweets from observers of next week’s CRTC process trigger more regulatory interference from the government side of the Ottawa River?

As we prepare to celebrate our nation’s sesquicentennial, how do we envision Canada’s communications marketplace in 2017?

What is our vision?

What are the measurable objectives that we can set to ensure that we get there? What are the strategies that we need to put in place in order to achieve those objectives? What tactics are consistent with those strategies?

That should sound familiar. A year ago I wrote “Set clear objectives. Align activities with the achievement of those objectives. Stop doing things that are contrary to the objectives.”

We are years overdue for an overall telecom policy review. Increasingly, we are seeing an overlap between telecom and broadcasting issues coming before the regulator. Teksavvy’s requests in the CRTC TalkTV process and a CRTC decision under the Digital Media Exemption Order this past Monday demonstrate the need to re-examine separate laws to govern these increasingly overlapping communications industries.

Indeed, the Netflix challenge of the CRTC’s authority gives rise to another reason for the government to create an expert panel, charged with exploring the role of broadcast and telecom regulation in a complex digital era. Moving forward on such a panel would provide an opportunity for the new media jurisdictional crisis to subside and allow issues associated with digital media regulation to be explored by a panel of those able to consider the matter with calm consideration. Naming such a panel now would simultaneously provide an appropriate political cover for a government that could not want such headlines when it is facing an election next year. Above all, we are long overdue for such a comprehensive review. The report would undoubtedly be delivered post-election.

This evening marks the start of Rosh Hashana, the Jewish New Year, as we mark the start of the year 5775. It is a time for reflection, for reviewing what we did wrong over the past year and seeking guidance for doing better in the year ahead.

My office will be closed later this afternoon and on Thursday and Friday to mark the holiday.

The news that Wind Mobile withdrew from the 700 MHz auction on the eve of its start was a deeply disturbing signal that Canada’s telecom policy framework is broken.

Rita Trichur, in the Globe and Mail, wrote “VimpelCom decided not to fund Wind’s purchase of 700-megahertz spectrum because of ongoing conflict over Ottawa’s foreign investment rules that, to date, have prevented it from taking formal control of the small Canadian carrier.”

For months I have been suggesting that it is time for a reset. As I said to IT World Canada, “Unfortunately Canadians are paying the price for … rules that are simply too unstable, inconsistent and at times incomprehensible.” For too long, our telecom policy framework has looked like the Calvinball rulebook.

As I told Business In Vancouver: “Wind’s withdrawal should be ‘a wakeup call’ that Canada’s telecom policies aren’t working.”

He added it calls into question the Harper government’s telecom policies, including its rules around foreign investment in the Canadian wireless space.

As he points out, Vimpelcom-Wind was the only new entrant in the Canadian wireless space that already has spectrum and the financial wherewithal to acquire more.

“These guys have spectrum, they have an opportunity to be the only new entrant bidder in Canada’s three most prosperous provinces and yet they can’t make the business plan work to continue investing in Canada.”

I told Mobile Syrup this situation is “an unfortunate outcome of a wireless policy where the rules are changing too frequently and are leading to an unstable investment climate.”

We are long overdue for the 5-year review of our telecom policy, recommended by the Telecom Policy Review Panel. We need to understand the market landscape, take stock of the conditions that have inhibited the build out of competitive networks, and develop policies that work for Canadians, encouraging investment in new technologies, products and services.

I get no pleasure from saying “I told you so.”

I am going to use this post to provide references and links to stories in respect of the announced changes that are coming for Canada’s wireless sector.

• Government Press Release and Backgrounder
• Globe and Mail article by Eric Atkins
• National Post article by Christine Dobby
• Global News article by Jamie Sturgeon
• Yahoo Dashboard article by Carmi Levy
• Canadian Press article by LuAnn LaSalle
• Mobile Syrup article by Daniel Bader
• Business in Vancouver article by Nelson Bennett
• BNN-TV story and interview of Anthony Lacavera by Howard Green

It is interesting that the government waited until after the bids were submitted for Mobilicity’s assets. Would the number of bidders have changed had there been knowledge of the new framework? Indeed, are there bidders for those assets who had advance notice of such changes?

What do these changes do to the incentives for investment?

We have frequently written about the continual flux in the fundamental regulatory framework for the sector – a Calvinball approach to the market. What is the impact on the investment climate for digital infrastructure? Will the proposed legislative changes, with the government opening the Telecom Act and RadioCommunications Act, be the final word?

Doubtfully.

At what point do we look holistically at the communications sector – including both broadcast and telecom – and bring all of the legislation into the 21st century. That would mean looking at appropriate changes to the Broadcast Act, or rolling all of them together into an integrated Communications Act. As I suggested in August, perhaps it is time for a fresh look at a Telecom Policy Review.

That sounds like a discussion for The 2014 Canadian Telecom Summit, taking place June 16-18 in Toronto. I would be remiss if I didn’t invite you to register early!

Industry Canada published the list of applicants for those companies that would like to bid in the upcoming 700 MHz auction.

The biggest surprise appears to be that there are no surprises. Despite its best efforts, no new foreign companies have been attracted to Canada’s mobile market.

Industry Canada will need to examine relationships between the bidders (and the companies behind the bidders) in order to ensure that there is no potential for bidding collusion or circumvention of the rules, but there are no new deep pockets threatening to disrupt the Canadian wireless marketplace.

As I described last week, we do not know anything about where these companies plan to bid, or which companies plan to bid for more than one block.

There are 14 different geographic areas that cover the whole of Canada; initial bid prices depend on the population and the amount of spectrum being acquired. Each bid point requires a deposit of $130,000 and covers about 100,000 people per block of 5 or 6 MHz. The paired blocks of spectrum have increased bid points required in the more populous geographies so 1,221 bid points are required for a national paired block license, versus 334 bid points for an unpaired block. A 5% down payment had to be submitted with the application last Tuesday; the remainder is due on October 29. Links to the relevant sections of the Industry Canada rules can be found in last week’s blog post.

It was widely reported last week that none of the major US carriers (AT&T, Verizon, T-Mobile, Sprint) were planning to participate in the Canadian auction. Perhaps some of them were unwilling to face the regulatory risk of being unable to sell at some point in the future. When the federal government denied the TELUS request to acquire Mobilicity, it changed the rules set out in the original AWS auction. As I wrote in late July, “Had the government simply said that the original AWS rules called for a 5 year hold and the acquisition was premature, that would be one understandable, and consistent message.”

Instead, the government continued its game of Calvinball, keeping us all guessing on what the rules will govern multi-billion dollar investments. A favourable investment climate doesn’t just mean that foreign money is welcome. Investors need to be confident about the rules are for taking their money out again.

In its zeal to prevent “undue spectrum concentration—and therefore diminish competition”, did the government’s June 4 announcement diminish the attractiveness of investment in Canadian wireless?

Industry Minister James Moore is on a cross country tour, defending the government’s position for its wireless policy.

Various sides of the wireless debate have been lining up soundbites, trying to encapsulate complex issues into 140 character tweets.

It isn’t the way policy for critical digital economy infrastructure should be developed.

It is good that Canadians are getting engaged in the issue. It is important for economic development, for rural services, for our federal treasury.

So I am not sure Minister Moore is correct in stating that the major telephone companies have been unsuccessful in their publicity campaign.

As the National Post wrote:

He characterized the telcos’ campaign as “impressively unsuccessful” and said it has not, in his view, resonated with Canadians, but added it has stirred up enough questions that he felt the need to defend his government’s policy aimed at, he said, promoting competition for the benefit of consumers.

While the telco’s campaign may not resonate with consumers, it appears to have played well with editorial boards across the country. It is the newspaper editorials that may have created the urgent need for the government to respond with a defensive campaign.

Phone companies are an easy target. In my early days working in the telecom sector, we used to be thankful for the post office – it was the institution that people hated even more. These days, who cares about the mail. So that leaves the phone companies.

We all pay a phone bill every month and everyone wants that bill to be lower. I wrote a blog post years ago about a poll that clearly had a problem. The poll was reported as saying three quarters of Canadian consumers wanted lower prices for internet services. C’mon, now. Do you really believe 1 in four Canadians don’t want a lower price? Of course we want a lower price on something we buy monthly. But at what cost?

The issues are more complex and not well suited to simplistic solutions, as Industry Minister Moore has stated in interviews from this week. But Minister Moore also answered the question of why Canadian prices are not among the lowest in the world:

Canada is the second largest country in the world in size but 34th largest in population. We do have expectations and obligations to rural parts of this country to ensure that there is some comparable level of service

I have asked the question before: If Canadian wireless prices are so high vis a vis costs, doesn’t that create a great business opportunity for new entrants? Why aren’t competitors lining up to enter the market? Around the world, carriers get the same reports that show world leading average revenue per user (ARPU), but the carriers also understand that Canada also has world leading capital dollars per customer being invested by Canadian carriers.

Investors want to maximize their returns and perhaps as important, they would like some certainty they can exit a market when they choose to take their profits or cut their losses. This is where Canada’s ever changing policy framework creates the greatest risk.

In some of his interviews, Minister Moore has pointed out that the major carriers were comfortable with the rules set out in March. As he told IT World Canada:

The incumbent big three, by the way, were originally quite comfortable with our policies (announced March 7), they said good things about it. It’s only because in May Verizon made noises about exploring coming into the Canadian marketplace that the incumbents decided to put out a big joint effort to stop Verizon from coming into Canada.

I would suggest that the biggest issue wasn’t the new rules set down in March 2013, or the compromises found by “Solomon cutting the baby” with the 700MHz rules in March 2012. Our summer of wireless discontent was kicked off with the June 4 announcement that turned down TELUS acquiring Mobilicity.

Had the government simply said that the original AWS rules called for a 5 year hold and the acquisition was premature, that would be one understandable, and consistent message. But the government went further when it said:

Our government has been clear that spectrum set aside for new entrants was not intended to be transferred to incumbents. We will not waive this condition of licence and will not approve this, or any other, transfer of set-aside spectrum to an incumbent ahead of the five-year limit,” said Minister Paradis. “Our government will continue to allow wireless providers access to the spectrum they need to compete and improve services to Canadians. We are seeing Canadian consumers benefit from our policies and we will not allow the sector to move backwards. I will not hesitate to use any and every tool at my disposal to support greater competition in the market.

In addition, the Government also outlined improvements to the policy on spectrum licence transfers that will be released in the coming weeks, which followed consultations launched in March 2013. Going forward, proposed spectrum transfers that result in undue spectrum concentration—and therefore diminish competition—will not be permitted. This policy will apply to all commercial mobile spectrum licences, including the 2008 AWS licences.

That June 4, 2013 policy changed the AWS investment rules in the middle of the game. When the government set down the rules for its $4.2B AWS auction in 2008, it had effectively bet that 5 years would be long enough for the new entrants to disrupt the marketplace through increased competition. The licenses all had the same transfer condition:

Licences acquired through the set-aside of spectrum may not be transferred or leased to, acquired by means of a change in ownership or control of the licensee, divided among, or exchanged with companies that do not meet the criteria of a new entrant, for a period of 5 years from the original date of issuance.

On June 4, 2013, two weeks after Industry Canada met with Verizon on May 21, the rules got changed. Investors in Canada’s telecom sector – new entrants as well as incumbents – got the rug pulled out with another change that I like to call Calvinball.

That isn’t how any game is supposed to be played, and especially not where the stakes are measured in billions of dollars.

Despite billions of dollars in Canadian equity value being played with, the level of hyperbole by both sides has gone over the top. When John Cruickshank, publisher of the Toronto Star said Prime Minister Harper “betrays the interests of his country for a foreign power“, it is difficult to take anything else in his commentary seriously. “Leninist economic planner”?

Really?

Such a sophomoric level of discourse is perhaps driven by responding to those who think Verizon is the white knight to fight “Big Telecom”. I have been unable to get a response to a question about whether Verizon is also part of the “Big Telecom” clique. As I wrote on Twitter:

It is time to raise the level of the debate, stop the name calling, deal in issues at the level of depth that it deserves.

The government knows very well that Canada actually has lower concentration of its wireless market than most countries. Nearly half the OECD has 100% of their wireless in the hands of 3 or fewer carriers. The OECD average is 93% share among the top 3, so Canada has more competition already despite what the Minister acknowledges as a small population across a large landmass.

Petitions from the Conservative Party or Open Media are going to do nothing but build a mailing list for their partisan fundraising. If Canadians want more competition in wireless, people should sign up for services from the competitive providers that are already out there.

It would be helpful to see the scorecard by which the government is measuring the state of competition, as implicit in its June 4 policy announcement.

It would also be helpful for people outside our urban centres to understand the lack of meaningful obligations to extend networks to rural communities under the current 700MHz framework.

I continue to believe it is time to push the reset button.

Minister Moore told Cartt.ca that the spectrum auction has been delayed twice already and it will not be delayed again.

We are playing a high stakes game; opening bids in the auction will be just shy of a billion dollars. With Parliament prorogued, is there really no time to take a breath, get everyone to dial down the rhetoric and ensure that we get it right?

As Tim Harper wrote in The Toronto Star, Minister Moore is well within his rights to decide against, or even ignore, the arguments being set out. But it is unseemly, on both sides, to turn this important debate into a white hats – black hats showdown.

Is the public interest best served by pushing ahead?