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Size matters. When it comes to paying cost awards for public interest groups participating in telecommunications regulatory proceedings, allocations are generally based on relative size of the companies’ telecommunications operating revenues (TORs).

A recent series of cost awards associated with Telecom and Broadcasting Decision CRTC 2022-28, “When and how communications service providers must provide paper bills”, attracted a number of cost applications that were awarded $53,646.72 as follows:

• Telecom Order CRTC 2022-33: $2,015.00 to the Canadian National Society of the Deaf-Blind
• Telecom Order CRTC 2022-34: $15,463.97 to the CNIB Foundation
• Telecom Order CRTC 2022-35: $3,080.00 to the Canadian Association of the Deaf
• Telecom Order CRTC 2022-36: $4,338.00 to the Deaf Wireless Canada Consultative Committee
• Telecom Order CRTC 2022-37: $6,345.00 to l’Union des consommateurs
• Telecom Order CRTC 2022-38: $1,527.50 to Deafness Advocacy Association Nova Scotia
• Telecom Order CRTC 2022-39: $10,761.15 to PIAC-NPF
• Telecom Order CRTC 2022-40: $2,221.72 to the Consumers Council of Canada
• Telecom Order CRTC 2022-41: $7,894.38 to the Manitoba Coalition

As a matter of practice, the CRTC doesn’t allocate amounts less that $1000 in order to simplify cheque processing and collections for both the recipient and the payor. As a result, despite the possibility of allocating costs between Bell, Eastlink, Distributel, Videotron, Rogers, SaskTel, Shaw, TekSavvy, TELUS, and Xplornet, the formula used by the CRTC resulted in costs being charged just to Bell, Rogers and TELUS.

Rogers has filed an appeal of the awards [zip, 1.8 MB], questioning the CRTC on the correctness of the revenues used to determine the allocations between the companies footing the bills.

The total amounts under dispute are not huge, relative to some files we have seen, such as nearly half a million dollars sought by various groups in the 2008 internet traffic management proceeding.

Rogers is wondering what the CRTC used as the basis for its allocations. Did the Commission use wireless revenues or total revenues? Did the regulator include the revenues from all the related companies and subsidiaries on behalf of which Bell responded?

Rogers says it is paying the awarded amounts in the meantime to ensure the public interest groups aren’t caught without funding in the interim, saying that it will collect reimbursement from the other service providers, should the CRTC rule in its favour.

A similar issue arose a couple years ago when TELUS challenged cost award allocations in a proceeding that led to Telecom Decision CRTC 2020-33.

As you will recall, I have expressed concerns about some past recipients of funding. It is good to see the level of attention to detail being paid to relatively small amounts of money in these cost awards.

Section 27(2) of the Telecom Act says “No Canadian carrier shall, in relation to the provision of a telecommunications service or the charging of a rate for it, unjustly discriminate or give an undue or unreasonable preference toward any person, including itself, or subject any person to an undue or unreasonable disadvantage.”

So, what does that mean?

When a complaint comes into the CRTC under this section, there is a two part test to determine if there has been a violation of this provision of the Act. As the CRTC wrote in a case we’ll look at today, “The Commission must first determine whether there is a preference or disadvantage. If it determines that there is one, it must then decide whether the preference or disadvantage is undue or unreasonable.”

Today’s story takes place in the greater Halifax area and the story began 6 years ago.

In 2016, Eastlink proposed to locate its Nova Scotia point of interconnection for third-party internet access (TPIA) at its data centre in Pennant Point, located about 30 kms from downtown Halifax. At the time, the CRTC concluded that based on the information provided at the time, there may be a disadvantage to competitors (and a corresponding preference in favour of Eastlink), but it would not be undue or unreasonable.

In 2020, City Wide filed a complaint with the CRTC, alleging that representations that had been made in 2016 about the availability of transport facilities to Pennant Point were incorrect, and that the data centre is not carrier neutral. It sought the relocation of the provincial point of interconnection to downtown Halifax. CNOC and Teksavvy generally supported City Wide’s position; Rogers and Shaw generally supported Eastlink.

The CRTC again found that the Pennant Point location “subjects City Wide to a disadvantage and provides Eastlink with a corresponding preference.” In particular, the Commission found that a lack of competitive options for transport facilities to Pennant Point, coupled with the fact “that Eastlink’s own retail operations are not similarly affected … results in Eastlink subjecting City Wide to a disadvantage and providing itself with a corresponding preference.”

However, the CRTC found that the availability of “economically feasible transport options” isn’t the only consideration for determination of a suitable point of interconnection. The CRTC found that it is reasonable for a carrier, such as Eastlink in this instance, to consider its existing network configuration and “attempt to limit the extent of any modifications needed for this configuration.”

Finally, the CRTC found that the evidence “does not support the view that transport costs have been a significant barrier to competition”. Evidence in the proceeding showed that City Wide has increased the number of customers served by Eastlink’s aggregated access service, and overall, the number of wholesale internet end-users on Eastlink’s network has grown since the approval of the point of interconnection at Pennant Point.

As such, the CRTC refused to order the relocation from Pennant Point to downtown Halifax, effectively finding that the location (and any associated advantage or preference for Eastlink) is not unreasonable.

Too many community networks are failing their constituents.

I’m sure there are some exceptions, but the record shows that too many of them are a drain on scarce community financial resources and have created disincentives for private sector broadband investment. In the end, such projects can delay delivery of broadband services, precisely the opposite of what should have been sought.

Recently, i-Valley, an organization claiming to be behind “Canada’s largest rural network”, issued a press release “calling on all Federal Parties to take a new approach to broadband creation”. In “Fresh Approach Needed for ‘Broadband Nation’”.

Let’s take a look at i-Valley’s signature project, a broadband network for the Municipality of Pictou County in Nova Scotia. “In 2016, Council initiated a planning process to remedy the situation by taking the future into its own hands, without waiting for outside agencies for relief.”

The municipality has allocated $11M toward construction of the first ring. Another $4.46M in federal funding has been allocated as part of the rapid response stream of the Universal Broadband Fund, connecting 3600 households.

Five years later, the future still hasn’t arrived for residents of the Municipality of Pictou County. Five years. A fresh approach is certainly needed.

Last summer, I wrote about Beaumont, Alberta (“When a smart city plan isn’t so smart”). It still hasn’t decided on whether to proceed.

The poster child for community networks in Canada, O-Net, has been pushed into receivership by the town of Olds, Alberta, for failure to repay a $14M loan.

I have written before that Community networks are hard. A year ago, Rob McCann of Clearcable Networks (and President of the Hamilton Technology Centre) asked “Have Open Access Networks Seen Their Day?” in an article in the Intelligent Community Forum.

While the Conservative Party platform says it will “Promote investment in communications facilities by local and regional communities”, it should carefully consider the history of failed local government attempts to deliver on the promise of community networks.

There are business models that can accelerate investment in broadband facilities in underserved communities.

And, there are models that squander time and tax dollars. The smarter “Smart Communities” know the difference.

A few years ago (ok, maybe 8 years ago), Scotiabank published a report: “Canadian Wireless Myths and Facts”, that gave rise to my blog post “Top 10 myths on Canadian wireless”.

With so much going on in area of telecom policy I figured this would be a good time to update the list and expand it to include more than just wireless.

Policy decisions should be evidence-based, but unfortunately there are a lot of myths that keep being repeated, so much so that some even show up in the media and elsewhere.

Let’s take a look at some of the most common myths. We’ll start with these five, and follow-up with some more sometime soon.

1. Myth: Canadians pay more for less

Whether it’s mortgage payments, the gas bill, or internet connectivity, nobody likes paying bills. The feeling is even worse when you think that someone is getting a better deal. So it’s understandable that Canadians get upset when repeatedly told that they pay more than others for the same or worse service. But like most folklore, it’s not true.

So why do people think this? There are number of international price comparison studies that purport to show that prices in Canada are higher than in most other countries. Unfortunately, most people just read the headlines and do not examine how the study was conducted, what data was used, or critically assess the conclusions. To quote a review of one such study, these price comparisons are often little more than “a careless mish-mash of data points from which no reliable conclusion can be drawn.”

To be clear, there are differences in prices between carriers and between countries. But in addition to using faulty methodology and outdated data, one-dimensional price comparisons make no effort to understand the differences or determine the underlying value that customers are receiving from country to country.

To give one hypothetical example, consider a mobile plan that provides 10GB of data per month with an average download speed of 60Mb/s for CA$60 versus a plan that offers 10GB of data with an average download speed of 3Mb/s for CA$40. Which is the better plan? Based on the methodology of some price comparison studies, consumers would be better off with the 3Mb/s plan because it costs less. That may be true for consumers who don’t use data intensive applications, but for those who do, the $60 plan provides better value.

Another factor to consider is the cost of providing the service. One study found that the cost of building wireless networks in Canada is 83% higher than the average of a group of benchmark countries (Japan, Germany, France, U.K., Italy and Australia) and 34% higher than the U.S.. This makes sense as Canadian network operators, among other challenges, must serve a much lower customer base spread over a wide area, purchase equipment in $U.S., and face much higher spectrum costs.

The point is, price comparisons are meaningless unless one takes into account the plan attributes, quality of service, country attributes and cost of providing the service. While they don’t generate the same headlines, there are studies which take these factors into consideration. For example, a U.S. industry association commissioned a study to compare the value received by wireless subscribers across 36 countries, including Canada. It concluded that Canadians receive more value for their dollar – or “more bang for their buck” – than all other G7 countries plus Australia.

2. Myth: Pricing equals Affordability

Similar to the previous myth, the term “affordability” gets thrown around without enough consideration of the facts. A couple of months ago, I wrote that the expression has been getting hijacked and applied to alternate agendas, such as ISPs seeking to bypass wholesale broadband access with taxpayers footing the bill for capital investment.

We all want lower prices for everything, but that doesn’t mean that current prices aren’t affordable. To look at affordability, we need to look at price relative to the ability to pay. As I wrote recently, Canadian communications pricing actually ranks pretty well using that metric.

That is certainly not saying that that all Canadians can afford the cost of connectivity, or the devices to connect. Unfortunately, there are Canadians who find it difficult, if not impossible, to purchase mobile devices or computers, and basic internet connectivity. As long time readers know, for nearly 15 years, I have been campaigning and advocating for solutions to this important social challenge.

When people can’t afford necessities such as housing, electricity, food, and dental care, we do not try to resolve the problem by forcing the repricing of these goods and services for the entire marketplace. Instead, governments provide targeted social assistance.

In the U.S., the government recently introduced the Emergency Broadband Benefit which provides a monthly subsidy of between $50-75 that can be used to acquire broadband connectivity. There are also efforts to make such programs permanent.

A similar government program may ultimately be required in Canada, but in the meantime, we applaud the efforts of service providers like Rogers with Connected for Success, TELUS with Internet for Good, and the various carrier partners delivering the Connecting Families initiative.

Meanwhile, prices are falling. Statistics Canada data shows that prices for wireless services are continuing to fall while the prices of other goods and services are rising.

3. Myth: MVNOs aren’t allowed in Canada

Yes, Mobile Virtual Network Operators (MVNOs) should be allowed in Canada. And, (surprise!) they already are.

Indeed, there are a number of MVNOs that have been operating in Canada for years, as well as newer MVNOs like CMlink and CTexcel. Just like most countries in the world, MVNOs are permitted in Canada but, just like almost everywhere, MVNOs aren’t mandated by the regulator.

There are very few countries in the world where the regulator has ordered mobile carriers to make their networks available to MVNOs, and I’m not aware of any regulators that have set wholesale rates. Rather, in the majority of countries with MVNOs, the MVNO must negotiate an arrangement for network access with the mobile network operator. As in all commercial negotiations, there must be a benefit for both parties to the arrangement. This could be through having a well-known brand or reaching a market that the network operator is not targeting. In the end, the MVNO must be able to attract new subscribers to the network operator’s network that the network operator cannot gain by itself.

4. Myth: Government has set a 50/10 minimum speed target for everyone

Over and over I keep reading people say that the CRTC set a minimum basic internet standard of 50 Mbps (down) and 10 Mbps (up) with unlimited download capabilities. A recent ‘Framing Paper’ for a workshop series from Ryerson’s Leadership Lab on ‘Overcoming Digital Divides’ perpetuates the myth that 50/10 is a minimum basic speed.

The CRTC did indeed set a target with those characteristics, but the intent was for all Canadians to have the choice to subscribe to such a broadband service, not a statement that 50/10 is a minimum basic speed that all Canadians require.

There is an important distinction to be made. Some people may choose to subscribe to speeds and capabilities below the infrastructure target; not everyone needs a 50/10 service.

So if you read a report that says X% of households in a given area do not have broadband connectivity that meets the 50/10 target, look closely to see if the report makes clear whether those households do not have that level of connectivity because it is not available or because, for whatever reason, they have chosen not to subscribe to that level of connectivity.

It will be difficult to overcome digital divides if we can’t keep the targets straight.

5. Myth: Other countries have a lot more competitors

Some people say that Canada’s mobile wireless market is too concentrated. But what standard are they applying when making these statements?

Of 29 European countries (including the UK), as of the beginning of 2019, there were 19 countries with 3 mobile operators and 10 with 4 mobile operators. In the period between 2010 and 2018, there 4 European countries that went from 4 to 3 mobile operators, and 3 countries that went from 3 to 4. [pdf, 889KB]

In the United States, the number of tier 1 national mobile operators went from 4 to 3 when T-Mobile and Sprint merged in 2020.

Canada has 3 national operators and a number of regional operators that serve different parts of the country.

In addition to the number of competitors, a common measure of market concentration is the Herfindahl-Hirschman Index (HHI). The HHI is determined by squaring the market share of each firm competing in the market and then summing the result numbers. The lower the HHI the less concentrated is the market.

According to data from GSMA Intelligence, as of 2018, the HHI for Canada was 2518. The HHI for the United States, prior to the merger of T-Mobile and Sprint, was 2664, while the weighted average HHI for the EU was 2966.

Whether looking at the number of mobile wireless operators or the HHI, to say that Canada is an outlier is simply not true.

Which other myths you would like addressed in a follow-up?

When Quebecor reported its results on March 12, Scotiabank observed that it beat analyst estimates for EBITDA, its Free Cash Flow estimates for 2020 and 2021 were raised substantially, its dividend was increased 78%. Still, the company’s stock price fell 11% that day.

These are difficult days in the investment markets. Scotiabank said “With both Canadian and global markets in turmoil, we believe the telecommunications space is a good place to hide” (March 10). In a follow-up late last week, Scotia said, “Communication services are critical during the current COVID-19 crisis. Our financial estimates are not immune to reductions, and the impact could come in waves, but we believe our telecom and cable financial estimates will be more resilient than media and many other sectors.”

Similarly, when TD Securities issued its report “Lowering Estimates for COVID 19”, it said “we want to make it clear that the point of this analysis is to identify opportunities as opposed to highlighting risk. Most of the names we cover are high-quality companies with defensive business models, sustainable dividends, and strong balance sheets.” TD is estimating that net additions for Canada’s wireless industry will decline 10% for the year, due to its estimate of a 30% reduction in net additions in the first 2 quarters of the year. Be sure to note this is a reduction in net additions, not a reduction in total subscribers. Offsetting the reduction in net additions, TD believes churn will be reduced by 0.3 percentage points. “The fact that many of these stocks have sold off as much as the overall market is illogical, in our view, … and we believe it has created some incredible buying opportunities on a risk-reward basis.”

Scotiabank noted “An area we are monitoring closely is network capacity.” So far, the networks for the major carriers are performing well. Still, it was fascinating to see a warning from Open Media, asking its followers to “Be considerate in your internet use”, and suggesting that people “try to keep downloads to sleeping hours when people are less likely to be accessing essential services and information on the web.” It is good advice, but I found it interesting to note that this message didn’t come from service providers.

So far, the networks have performed remarkably well under the stress of increased loads, and service providers have tried to provide some relief for their customers facing significant changes to how they use communications services as a result of quarantines and “social distancing” that has closed schools and sent most people home from work.

As Scotiabank observed,

Telcos and cablecos have stepped up their efforts during the COVID-19 crisis. We started this note by highlighting just how important communication services are during this current time of crisis, as more people are working remotely. We were pleased to see that all of the companies have taken important steps to ensure that services not only remain uninterrupted regardless of their customers’ circumstances but also, in many cases, are enhanced to address more work and entertainment at home.

An opinion piece by Rita Trichur in the Globe and Mail last week said the current pandemic is providing all of us with a better appreciation of how dependent we are on their smartphones. “Data use is surging on wireless networks as more people work remotely, banks encourage customers to use mobile apps instead of visiting branches and Canadians of all ages turn to social media to stay connected and informed.”

The telecom industry has stepped up to the challenge of handling the disruptions on our lives imposed by the COVID-19 pandemic. As Canada’s policy chiefs begin to examine how to respond to a new state of normalcy, the Prime Minister’s Office needs to re-examine the mandates handed to members of Cabinet. Targets that may have seemed appropriate last fall no longer fit within an environment that has yet to settle on a new equilibrium.

The Globe opinion piece concludes, “Wireless is a high-growth industry and one of Canada’s last industrial bright spots. The government’s target of a 25-per-cent price reduction always seemed arbitrary, but in light of the current crisis, it’s downright tone deaf. Ottawa should scrap it.”

There isn’t a need to focus at this time on the pricing objective; my views on such matters were detailed in posts on March 5 [“Moving the goalposts” and “Declare victory. Consumers are winning“]. But there should be a recognition by Ottawa of the value of Canada’s telecom sector as an “industrial bright spot” . Governments should be looking at ways to encourage increased employment created by further investment by the sector. Policy leaders need to explore how government can clear the path for increased capital spending, expanding capacity and extending the reach of networks.

Scotiabank’s review last week commented on the “initiatives that telcos and cablecos have undertaken to help their customers and society cope during the crisis.” How can we clear roadblocks that inhibit or discourage investment? What steps can be taken to enable, and indeed encourage, telecommunications carriers to reinforce Canada’s digital infrastructure to continue to deliver world leading service quality to Canadians throughout this crisis and beyond?