Search Results for: quality coverage price

Many of us have come to expect constant connectivity.

I don’t mean we necessarily want to be online 24/7, with a screen in front of our face around-the-clock. But, we want to be able to be connected whenever we want, wherever we happen to be.

Constant connectivity.

Most of us have phones that are effectively able to serve as mobile offices, equipped with word processing and other business apps. Personally, I find spreadsheets painful to navigate on my 5-inch screen, but I frequently edit blog posts and documents from waiting rooms or restaurants. We have tablets, computers, smart TVs, smart speakers, thermostats all connected to our home internet. As I write this, my home router reports 33 devices are connected. (I don’t have many of the “smart home” devices that are increasingly commonplace).

On our mobile networks, in addition to our smartphones, we have metering and other forms of telemetry. With home security and health applications, we increase the need for reliability, often using wireless backup for wireline connections. There are many working groups talking about connected autonomous vehicles.

This state of constant connectivity carries with it a variety of implications.

Many applications can be designed to tolerate hiccups in their connections. For example, by their very nature, email messages are transmitted on a ‘store and forward’ basis. A delay measured in tens of seconds or even minutes or hours is somewhat meaningless for most messages. It is silly to be concerned about a sub-second delay for emails or most text messaging. Most streaming video applications are designed to buffer the signal, storing multiple seconds of content on your device in anticipation of possible interruptions. But, what about voice and two way video calling? Delays (latency) of more than a few hundred milliseconds can be challenging for many who are used to virtually instantaneous responses in a normal conversation. We can witness the uncomfortable user experience when foreign news correspondents are having on-air communications with anchors using satellite connections.

What about performance issues with applications requiring non-stop high performance connectivity, such as remote surgery?

Connected vehicles is a category that enables us to understand a wide range of performance requirements, just in connecting a car. What kind of network performance should be anticipated by developers of connected car applications? The performance characteristics will vary based on whether the connectivity is used for navigation, entertainment, diagnostics, accident avoidance, or telemetry for vehicle maintenance (among other applications).

For many applications, constant connectivity may not have to be quite so constant.

Over the past few years, I have frequently referred to the tension between quality, coverage and price in architecting networks. Increases in coverage, or improvements in performance are always possible, but there is a cost associated with each. That cost ultimately would need to be recovered.

Do regulation and policy recognize that not all bits need to be treated the same?

How should variances in technical requirements receive consideration when examining network resilience from a regulatory perspective?

How do we ensure that appropriate incentives are in place to encourage continued investment in networks for improved reach, robust network resilience, increased capacity and more advanced capabilities?

In my view, it is long past the time for ending regulated cross-subsidies.

Three years ago, I wrote “Cross subsidies in a competitive marketplace”. Nearly a decade ago, I wrote “The future of communications cross subsidies”, noting “It used to be so much easier to manage a system of cross subsidies for communications.”

In the old rate-regulated monopoly days, if the regulator wanted consumer services to be subsidized by businesses, rural services to be subsidized by lower cost urban rate-payers, basic local phone service subsidized by discretionary long distance services, Canadian TV production subsidized by cable TV distributors, it could just issue an order to make it so. “So let it be written; so let it be done.” The rates were regulated to ensure service providers had an opportunity to make a resonable return on their investments; consumers had nowhere else to go to arbitrage artifically elevated rates.

As I wrote before, there was a political attractiveness to the communications regulator engineering payment plans for these social benefits. Effectively, these cross subsidies were a hidden tax on communications services, managed off-the-books outside the government tax system. The government could take credit for providing social benefits (lower consumer rates, lower rural prices, increased Canadian content development) without politicians assuming any blame for what would have otherwise been higher taxes to fund these social benefits.

Then, along came competition. Thirty years ago, when long distance competition was first launched, there were explicit fees charged beyond the costs of interconnection – “contribution” (as though it was a charitable donation) – to offset the loss of the excess profits used to subsidize residential phone prices. Rate rebalancing largely reduced these requirements, and a recent CRTC consultation (2023-89) is looking at the evolution of the CRTC’s Broadband Fund.

Today, virtually every segment of the communications industy is competitive. Telecommunications services are provided by countless service providers in Canada and abroad, using multiple technologies, rendering obsolete those regulations that presumed telecommunications over traditional twisted copper wires. Two-way voice (and video) communications are just another app, using analog or digital signals riding on copper, fibre, coax, wireless, or any internet protocol connection. Video services are delivered using regulated broadcast distribution systems or using over-the-air transmission, and people are subscribing to a seemingly infinite array of global streaming services.

How can a system of cross subsidies survive, when consumers are able to choose from service providers that aren’t encumbered by such additional regulated costs?

For that matter, how can traditional broadcasters compete, when there is an imbalance in the burden of regulatory obligations? In a competitive environment, I would suggest that imbalances in regulatory obligations are another form of cross subsidies.

Over the past month, the issue of cross subsidies has come up in two different contexts.

In the first, the CRTC is requiring Rogers to offer a wholesale service to its competitor, Videotron, saying that the financial shortfall can be made up “through other telecommunications services,” all of which are competitive.

In the other instance, an opinion piece in the Globe and Mail says people should ignore concerns about the financial viability of broadcasters because the parent companies are making lots of money in other lines of business:

BCE (which owns CTV, and Noovo in Quebec), Rogers (CityTV) and Quebecor (TVA) complain that competition from CBC/Radio-Canada for scarce advertising dollars is hurting their conventional television networks. Yet, they can hardly plead poverty. Their wireless businesses generate billions of dollars in profits and enable them to cross-promote their networks’ news content on customers’ phones.

It is a ridiculous argument.

A company may choose to subsidize one line of business, if there is a promise of growth and profitability in the near-future. But, if the money-losing line of business is spiralling downward, with its main source of revenue under threat from competitors operating with fewer regulatory obligations, the company will either have to cut costs, find new sources of revenue, or try to shed some of those assets.

The idea that a private sector business should perpetually subsidize a money-losing line of operations with revenue from stronger lines of business makes no sense. A rational business will restructure, or shut down those units that have no opportunity to climb out of the red.

Cross subsidies are simply not sustainable in a competitive environment. Such schemes also cut against Canada’s stated objective of lower wireless prices and increased investment to expand coverage and improve quality. As Dvai Ghose recently wrote in the Globe and Mail, “While the CRTC may have good intentions, it demonstrates naiveté when it comes to the private sector, and the consequences could be incredibly destructive for wireless investment and quality in Canada, risking our ability to compete globally.”

How many contortions will legislators and regulators perform in order to capture all communications services within the so-called “system”?

It is long past time to end Canada’s system of regulated cross subsidies and the market distortions caused by trying to maintain them.

The following opinion piece, by Canadian Telecommunications Association President and CEO Robert Ghiz, first appeared on July 14 in Wire Report, as “OPINION: Declining prices and record levels of investment show competition is increasing in Canada’s telecom market”.

With the dust having settled on Rogers Communications’ acquisition of Shaw Communications and Quebecor’s related acquisition of Freedom Mobile, now is a good time to take an early look at the impact the acquisitions have had on Canada’s telecommunications market.

When the transactions were first announced, some questioned whether it would result in a lessening of competition in Canada’s telecommunications market and if Canadians would end up paying more. Based on what Canadians have seen so far, the answer to both questions is a resounding “no”.

Just weeks after these transactions closed, prices for entry-level 5G wireless plans offered by Canada’s three largest wireless providers dropped by as much as 35 per cent and the price per gigabyte (GB) of data fell by as much as 50 per cent.

Other brands introduced new plans that offer more data at lower prices than their previous plans. Under its new ownership, Freedom introduced its first truly national wireless plan – with data that can be used in both Canada and the United States.

Simply put, since the Rogers-Shaw-Quebecor transactions were completed, Canadian mobile wireless users are getting more for less.

These recent price reductions are just the latest in a multi-year trend of declining prices in Canada’s wireless market. In fact, while Statistics Canada’s All-items Price Index has increased by 15 per cent during the last four years, its Cellular Services Price Index declined by over 36 per cent during the same period. And according to the government’s own price study, Canadians pay less per month for wireless services than customers in the United States.

Price declines of this magnitude are a clear sign of the vigorous competition that is occurring in Canada’s wireless market. And it should come as no surprise. According to Bank of America, the Canadian wireless market has long been one of the least concentrated in the world. With Videotron’s acquisition of Freedom, Canada now has four national service providers, along with strong regional providers that have brought additional competition to the regions they serve.

But assessing the performance of a telecom market is not one-dimensional. While price is usually top-of-mind, quality and coverage are also important factors. Canada’s mobile wireless networks cover more than 99 per cent of the population, and, according to PwC, are the best-quality networks of all G20 countries. This is truly remarkable when you consider the distances that our networks must cover compared to those in other countries.

This level of performance and coverage extends beyond the mobile wireless market. Canada also has among the best performing and farthest reaching high-speed fixed internet networks in the world with median download speeds that are more than 60 per cent faster than the G20 average, according to Ookla’s Speedtest Global Index.

Canadian networks provide access to speeds of one gigabit per second to a greater percentage of households than those in countries like Australia, the U.K., Italy, France, and Germany, based on a comparison of Australia’s Broadband Performance report, the CRTC’s Communications Market Report, and the European Commission broadband coverage report.

Meanwhile, internet service prices have remained relatively flat, defying the overall inflationary pressures that have resulted in significant increases in the price of most other goods and services.

These positive outcomes did not happen by chance. They occurred only because successive federal governments and the CRTC, have long recognized that facilities-based competition – or competition among network operators – is the preferred form of competition, as it determines Canada’s network quality, coverage, and reliability.

In its 2019 study of competition in Canada’s broadband industry, the Competition Bureau observed that while wholesale-based (or resellers) and facilities-based competitors compete against each other every day, “facilities-based competitors engage in a dynamic form of competition to successfully introduce better networks over time through investments in new technologies.”

The Competition Bureau further described the benefits of facilities-based competition as follows:

This type of dynamic competition benefits competition in at least two ways. First, it is logical that better networks provide better results for consumers: faster, less congested connections that grow and change more or less in tune with consumer demand. Second, once the investment in new networking equipment and physical lines has been made, companies have a strong incentive to compete hard and win customers in order to generate revenues sufficient to recoup those investments.

This race to provide the most robust networks is an important source of dynamic competition. It results in consumers having access to the fastest speeds and best connections while, at the same time, driving substantial investment in the Canadian economy. And, at least over the past 20 years, it has been a self-sustaining form of competition, as both telephone and cable companies jockey to establish themselves as market leaders.

In recent years, Canada’s national and regional facilities-based providers have combined to invest an average of more than $9.2 billion per year in capital expenditures to expand and enhance wireline broadband networks in Canada. Facilities-based providers have also invested close to $3 billion per year over the same period in wireless infrastructure, and more than $12 billion in acquiring additional spectrum licenses.

The benefits of facilities-based competition cannot be matched by mandated service-based competition, which relies on providing reseller companies with access to the networks built by facilities-based network operators at mandated wholesale rates. Because they do not invest in building their own networks, resellers do not contribute to Canada’s network quality, coverage, and reliability. They do not contribute to closing the rural/urban digital divide, nor do they help Canada keep pace with the technical advances that are crucial to Canadian businesses remaining competitive with their international peers.

It is within this context that the CRTC is currently reviewing its wholesale framework that provides resellers with mandated wholesale access to high-speed internet services. The potential negative impact of wholesale regulation on investment is well-established. As the Competition Bureau stated in its 2019 broadband study:

…wholesale access regulation diminishes the expected profits of the investment, as some of the profits from the investments are instead earned by wholesale-based competitors using that network to serve consumers.

In other words, mandated wholesale access can lessen a network operator’s incentive and capacity to invest in expanding and enhancing its network facilities. Without such incentives and investment capacity, Canada risks falling short of the investments necessary to bridge the digital divide, stimulate research and innovation, maintain network security and resiliency, and provide the connectivity needed for Canada to remain competitive in an increasingly digital economy.

As the evidence shows, following the Rogers-Shaw and Freedom-Quebecor transactions, facilities-based competition is not only continuing to deliver ever-improving quality, coverage, and resiliency, it is also delivering lower prices and more value for money. To the extent the CRTC keeps mandated wholesale internet access as part of its telecom policy framework, it is crucial that it balances its wholesale objectives with the need to maintain the benefits of facilities-based competition and the incentives for private sector investment in high quality and resilient infrastructure and innovative services. Specifically, wholesale prices must be set at levels that ensure that investment incentives are maintained.

As I wrote last week, “Canadian carriers have spent billions of dollars investing in telecom infrastructure, but the job is not yet complete. This is not the right time for regulation to discourage carriers from investing in telecom infrastructure.”

Is there ever a right time?

What is the secret to making broadband customers happy?

Canadians love to bash our telecom companies. There is an organization, the Commission for Complaints for Telecom-television Services (CCTS), that deals with certain classes of problems. The semi-annual reports from the Commissioner provides statistics about the complaints received. The CRTC conducts “secret shopper” studies, looking for examples of “misleading or aggressive sales practices”.

It used to be that only the post office was a more despised institution, but who sends letters today? That leaves banks, airlines and the CBC as the competition for a title no one wants. Canadians love to hate our telecom service providers.

But, is anyone in Canada studying factors that contribute to actually making broadband customers happy?

There was a recent report, published by Roger Entner’s Recon Analytics, that looked at “The happiest and unhappiest broadband customers in the United States”.

One of the key questions around the happiest and unhappiest home internet counties is where they are and what the driver is behind the happiness and unhappiness. Every week, we ask our respondents a battery of questions around how satisfied they are with the service they receive. After surveying more than three hundred and thirty thousand respondents later, we have respondents from 2,368 counties out of 3,142 in the United States telling us are telling us where the happiest and unhappiest broadband customers in the United States and allows us to determine the root cause behind their experience.

Recon’s analysis of the data challenges some of the “commonly accepted truths”, such as whether technology influences happiness, or whether number of competitors is a factor. In four of the ten unhappiest counties examined, member-owned cooperatives were active.

What about making broadband customers happy? Recon Analytics found that nine out of the ten happiest counties were rural. In six of the ten happiest counties, coops are active, but not in the happiest broadband county. Is the mere presence of coops driving better service? The feedback from customers in such counties ranges from “terrific to terrible.”

The data found that Fiber or Cable coverage is also not playing a determining role.

At the end of the day, Recon found that the most important factor driving customer satisfaction was the individual performance of a provider in any given county.

Almost all the providers displayed uneven performance. The same provider that performed very well in some counties performed poorly in others. Cable providers like Comcast and Charter performed very well in some counties. Comcast’s exceptionally good performance made Mercer County, WV the happiest broadband county. Equally, its poor performance in Barnstable County, MA and Whatcom County, WA made them the second and third unhappiest broadband counties. Only AT&T Fiber performed consistently well in the ten happiest counties and was not present in the unhappiest.

Each of the providers was able to deliver service that made customers happy. And apparently, these same providers could make their customers unhappy.

Considering that the nationwide providers engage in nationwide standard pricing, the satisfaction score differences are not driven by low price, but by actual performance. Technology helps, but the key is local execution. Providers could improve their performance in markets by internally benchmarking their performance and extending best practices throughout the entire organization.

Over the past 5 years, we have had to deal with a number of hospitals in the Toronto area. There have been clear differences in our levels of “customer satisfaction”. Fortunately, living here in Canada, it has nothing to do with pricing. It has nothing to do with outcomes or the quality of healthcare provided. But, there are clear differences in the way staff interact with patients and their families. Let’s phrase it as the way the health services providers deal with their customers. In two of the hospitals, there has been palpable caring and empathy exhibited toward us from virtually every staff member. We feel it from the parking garage attendants selling long term passes, from the information desk clerks, in addition to what we experience from the medical care teams. In one of the other hospitals, patients and the public are made to feel like we are getting in the way. As though the staff are upset that patients interfere with what would otherwise be a great place to work.

How do executives instill a culture that encourages caring and empathy? Regardless of the business, whether running a hospital or a division of a phone company, how do your workers approach customer service? How do all of your employees (even those who aren’t in customer facing jobs) represent the company in a positive way within their communities? In a remote work environment, how do you establish such a corporate culture?

It seems it isn’t the technology that makes the difference in making broadband customers happy. I think it comes down to people and the culture engendered in the workplace.

Many of the headlines last week talked about the CRTC’s 10% interim reduction on wholesale internet rates as part of the Commission’s Notice of Consultation for its latest review of the wholesale internet access framework. The bigger impact story may be in the CRTC’s preliminary view that access to FTTP (fibre to the premises) over aggregated wholesale HSA (high speed access) should be mandated on a temporary and expedited basis, “until the Commission reaches a decision as to whether such access is to be provided indefinitely.”

This was a significant reversal of long standing CRTC policy.

The temporary and expedited nature is noteworthy. After all, let’s say the CRTC, following an evidentiary-based proceeding, reverses its “preliminary view” and decides that its long standing policy was indeed correct, that aggregated access to the FTTP networks could harm incentives to invest in extending FTTP to additional communities. How will the CRTC reverse this temporary and expedited order? Does anyone think the CRTC would actually order companies to reverse these customer connections?

How does that genie go back in the bottle?

In a note to investors about last week’s Decisions and Notice of Consultation, Bank of America wrote:

This wholesale HSA review was anticipated. The outcome could take over a year to complete. We believe it is likely to result in lower wholesale rates and increased access to fiber-to-the-home (FTTH) through an aggregated HSA model where independent ISPs connect to a central point of interconnection to access the facilities-based provider’s entire operating territory (transport and last mile). We think the key will be at what rates. Any incremental reduction to the existing rates helps wholesales. Small changes should help wholesales and have a minimal impact on investment. The risk for the CRTC is overshooting. If rates are set too low, incremental network investment will suffer and consumers’ long-term interest will be harmed. After an impressive multi-year industry investment in fiber, the industry’s ROIC is down materially from five years ago. In our opinion thoughtful regulation will consider the returns such a substantial investment requires (above the cost of capital) to avoid destroying value while encouraging ongoing investment. The industry has a good track record of balancing the demand of shareholders, subscribers, the regulator, and policy makers.

With last week’s Telecom Decision CRTC 2023-53, the CRTC flip-flopped once again on its policies regarding aggregated versus disaggregated wholesale internet access.

Let’s start by defining those terms. Wholesale-based internet service providers (ISPs) resell a portion of a facilities-based telecom service provider’s network. As the CRTC described them in 2015:

56. Aggregated wholesale HSA service provides competitors with high-speed paths to end-customers’ premises throughout an incumbent carrier’s entire operating territory from a limited number of interfaces (e.g. one interface per province). This path includes an access component, a transport component, and the interface component. The inclusion of the transport component enables competitors to provide their retail services with minimal investment in transmission facilities.
57. Disaggregated wholesale HSA service would provide competitors with high-speed paths to end-customers’ premises served by an ILEC central office or a cable company head-end through a local interface at the ILEC central office or cable company head-end. These paths include an access component and the interface component.

Obviously, it is a lot easier for an ISP to get up and running with just one connection to the telecom service providers. On the other hand, the wholesale-based ISPs have said they can add more value and product differentiation by connecting closer to their customer. However, in its October 2020 intervention in the CRTC’s consultation examining network configurations for disaggregated wholesale internet access, CNOC complained about the cost of connecting to all of the central offices or head-ends.

Since at least 2010, ISPs have promised to climb the ladder of investment. The CRTC and Competition Bureau have each endorsed policies that maintain incentives to promote investment in telecommunications facilities.

Unfortunately, the preliminary view of the CRTC in its Notice of Consultation will see ISPs climbing down that ladder, heading in the wrong direction.

Let’s look at the history of moving back and forth between aggregated and disaggregated wholesale internet access.

• On – Requested by Teksavvy in 2009/2010 CRTC Wholesale Consultation 2009-261: “The problem with the current aggregated services of both the ILECs and the cable carriers is that it forces a lot of the characteristics of those services to be flowed through to the wholesale customers of the ILECs and cable carriers, which really limits the ability of competitors to innovate and offer new differentiated services.” (Counsel for Teksavvy in response to question from CRTC Chair)
• Off – Request for disaggregated denied by CRTC Policy 2010-632: “The Commission is not persuaded that the ILECs and cable carriers should provide new wholesale access services – in the case of the ILECs, an ADSL access service located at the central office, and in the case of the cable carriers, a local head-end-based cable access service. In the Commission’s view, there is no convincing evidence to indicate that there would be a substantial lessening of competition in the absence of these services.” Notably, there is a dissent appended to that CRTC determination, where Commissioner Denton describes disaggregated access as “a technical arrangement permitting significant service innovation, by allowing specialist carriers to differentiate significantly their service offerings from the underlying carrier.”
• On – July 22, 2015 CRTC Policy (2015-326): “the provision of aggregated services will no longer be mandated and will be phased out in conjunction with the implementation of a disaggregated service. Incumbent carriers are directed to begin implementing disaggregated wholesale high-speed access services, in phases.”
• On – May 27, 2021 CRTC Press release: “The existing model, which is an aggregated high-speed access service, is in the process of transitioning to a disaggregated high-speed access service. This will enable competitors to access the fibre-to-the-home networks of the large companies and offer their customers faster Internet speeds and more services for all Canadians… Since 2016, the CRTC’s objective has been to complete the transition to a disaggregated wholesale model for access to the large companies’ high-speed broadband networks. This model will foster greater competition and further investments, so that the industry can better serve the needs of Canadians.”
• Off – March 8, 2023: CRTC Decision (2023-53): “The Commission finds that the disaggregated wholesale high-speed access (HSA) service framework has not fulfilled its mandate and requires reconsideration. The Commission determines that the network configuration for disaggregated wholesale HSA services will remain in Ontario and Quebec pursuant to existing tariffs and will not be introduced in other markets at this time.”

A lot of engineering and regulatory resources were invested developing these wholesale internet access schemes. The importance of consistency and predictability in CRTC determinations cannot be stressed enough, especially in consideration of the capital intensive nature of telecommunications. The new Policy Direction speaks in terms of predictability: “The Commission should ensure that its proceedings and decisions are transparent, predictable and coherent.”

As the CRTC moves forward with its wholesale services consultation, Bank of America said, “the key will be at what rates.”

Last week, I wrote about the difficult tension in seeking increased investment while maintaining, if not improving, affordability. We should measure success in telecommunications competitiveness by how we approach and achieve these often competing objectives: quality, coverage and price.

There is still much work to be done to extend the reach of broadband networks and to upgrade existing facilities. That will require billions of dollars of additional capital investment. That investment is being made by Canada’s facilities-based operators.

For that to move forward, government policies and regulation have to preserve that delicate balance between lowering consumer prices, while preserving incentives for investment to extend and enhance Canada’s high quality networks.