Search Results for: incentives

The communications regulator in the UK, Ofcom, has begun a consultation to look at the regulatory issues associated with next generation broadband access. What is the purpose of such a consultation? While the deployment of next generation access networks will be very positive for consumers, Ofcom wants to see investment take place in an efficient manner and wants to remove any unnecessary regulatory barriers that may delay such investment.

As a result, it wants to move quickly to clearly set out the options for regulating new broadband networks, defining where ex ante regulation may be appropriate.

Ofcom provides insight into its considerations in the executive summary of its consultation paper. It begins by describing the principles that have guided its approach to broadband services to date.

The regulatory approach to broadband has had an important role in shaping how the market developed. … The most relevant aspects for the broadband market have been:

• contestability: making the opportunity for entering the market accessible to a wide range of companies;
• innovation: allowing the maximum scope for innovation by the promotion of competition at the deepest level at which it will be effective and sustainable; and
• equivalence: the requirement for operators with market power to make the inputs used by their downstream businesses available to their competitors on the same basis.

But it considers that Ofcom needs to adapt these principles and add two additional considerations in order to appropriately recognize the level of new capital investment required for next generation networks.

The five principles underlying our proposed approach are:

• contestability: we think that timely and efficient investment will best be achieved by making the investment contestable, allowing any operator who considers that there is a business case for deploying next generation access infrastructure to invest, as soon as they wish;
• maximising potential for innovation: as we recognised in the Telecoms Review for current networks, we believe that the scope for innovation and differentiation is essential for competition in next generation access, and that infrastructure investment is helpful in achieving this. We are consulting on an approach which maximises the potential for innovation, while allowing for the current economic and technical uncertainty around next generation access;
• equivalence: strong competition in current generation broadband has been helped by ensuring that all operators are able to buy exactly the same wholesale products, with the same processes and at the same price, as operators with market power. We propose to apply this principle to next generation access, supported by approaches such as functional separation, essential to reduce incentives for anti-competitive behaviour while retaining incentives for efficient investment;
• reflecting risk in returns: we recognise that anyone who makes investments in next generation access is likely to face significant commercial risks. Regulation should reflect these risks in order to provide appropriate incentives for investment in the first place. We are consulting on a range of approaches to reflect such risk such as anchor product regulation, and risk-adjusted returns; and
• regulatory certainty: It is also important that the regulatory regime we adopt is clear and in place for a reasonable period of time, to allow investors the clarity that they need to invest with confidence. We are publishing this consultation and establishing a program of seminars and meetings supporting it to provide this clarity.

Ofcom does not appear to be especially concerned that the UK lags other countries with fibre network deployment.

It may therefore be that the efficient deployment of next generation access is simply earlier in some other countries than in the UK. We do not yet see evidence that the UK will be significantly disadvantaged economically or socially as a result. It is important that we continue to monitor the situation closely for any new evidence that would change this view. However, we continue to think that promoting investment which is timely and efficient in the context of the UK market is the correct approach.

Technorati Tags:
broadband policy

In Saturday’s National Post, Peter Nowak reported that RIM wants to see Canadian carriers offer more competitive data plans. Don Morrison is quoted in that article as saying:

We haven’t seen a carrier yet take up the banner of really going after the mass market. We think it’s to their benefit.

In yesterday’s National Post, Peter cites Michael Geist‘s blog which asserts that high fees for data services are what is holding back Canada’s introduction of the iPhone.

The barrier to the iPhone in Canada is not Apple. Rather, it is the lack of wireless competition that, as now RIM and Google both note, leads to pricing that places Canadians at a significant disadvantage compared with other developed countries.

I think that assertion is a little far reaching. If our data prices are holding back the Canadian launch of iPhone, why isn’t the iPhone available anywhere else in the world either?

The reply comments by the Competition Bureau in the AWS auction consultation address the state of competition from a legal perspective – particularly, competition law.

These sentences, extracted from the submission, may be an appropriate summary of the views of the Competition Bureau:

it is the removal of foreign ownership restrictions, not auction intervention, that may be the more powerful instrument of competition.

Given the present restrictions, however, intervention may still be appropriate if domestic entrants can provide effective competition, given the incentives of incumbents [to prevent entry by bidding their economic value for the spectrum plus a premium representing their potential loss of profit]

The paper represents a discussion, from the viewpoint of competition law, of the first round of submissions from all of the parties.

Technorati Tags:
Industry Canada, Competition Bureau, wireless, spectrum auction, AWS

One of the benefits of summertime is the opportunity to catch up on reading.

On Tuesday, I spoke of the FTC’s recent paper on Net Neutrality. One of my regular blog readers pointed me to an OECD overview of Internet Traffic Prioritisation that was prepared a year ago but only released to the public in April.

The OECD report identifies the following points in its executive summary:

A market-based solution is preferable to intervention in the market as a way to deal with issues regarding traffic prioritisation. However, it may be helpful for governments to publish a set of general principles for market participants. If problems occur, ex-post remedies can be used. The decision to apply ex-ante regulation will depend on whether regulators find evidence of persistent problems in the context of traffic prioritisation and if market forces or ex-post solutions are unable to sufficiently protect consumers. There is considerable debate about whether significant anti-competitive problems will appear in markets. There is little evidence of anti-competitive conduct to date and problems have typically been resolved quickly via market forces or through quick regulatory intervention in markets where they have appeared.

There are some recommended regulatory principles suggested by the OECD as steps that policy makers could take to reduce incentives for anti-competitive behaviour:

1. Reducing entry barriers that inhibit entry in the broadband Internet access market.
2. Re-examining existing competition laws to ensure they can address any abusive practices that could appear under a multi-tiered Internet structure.
3. Ensuring that subscribers can switch operators easily.
4. Improving disclosure to broadband consumers of how their broadband Internet service is affected by packet prioritisation.

The OECD paper suggests that it may be premature for governments to get involved in network-to-network traffic exchange, an issue raised in Canada by the Quebec ISPs. Further, many have expressed concern about neutral access for content providers which the paper suggests, along with the concerns of smaller, start-up firms, could be addressed through the pooling of demand for Internet access via a common ISP.

The paper seems to be another voice for a market forces approach for net neutrality.

The reply comments for the AWS auction consultation have been submitted to Industry Canada and there is entertaining reading to be found – at least among the information that I have been sent. [Has anyone else been having trouble reaching the Industry Canada website?]

On Wednesday, I wondered how TELUS would respond. Well, it has re-engaged in the battle for an open auction process – its submission is feisty right from the opening quote that appears above the header on its executive summary:

One thing both TELUS and Quebecor agree on: AWS is not simply about wireless phone service. AWS represents an alternative information and entertainment content distribution platform. Small wonder that cable companies want to restrict entry by carriers like TELUS into that line of business. However, no matter how many ads Quebecor runs in their newspaper empire about wireless prices, a simple truth remains: wireless prices keep declining year over year while cable bills just keep going up.

Any doubts about its position? In my Wednesday post, I referred to Darren Entwistle’s comments that were contingent on TELUS moving forward on its BCE acquisition. Any support of new entrant incentives were tied to a condition: “Should Telus’ acquisition of BCE proceed, we believe…” The BCE deal is off the table. As a result:

In the current competitive environment, no justification exists for Industry Canada to abandon the department’s objective to rely on market forces to the greatest extent possible, in telecommunications generally and in this market in particular.

Quebecor isn’t withering from the argument. It issued a press release saying

the government should take measures to prevent the three large, current providers of wireless services from snapping up all the frequencies that will be put up for auction in the coming months. … The three main Canadian mobile telecommunications companies now have more spectrum than they need to serve their customers and supply advanced broadband mobile services. As an illustration, the three companies have an average of 60 MHz of spectrum to serve 1.1 million people in the Ottawa region, while six U.S. providers have an average of 45 MHz to serve 19 million people in New York City.

TELUS responds with:

These statements seek to throw up a smoke screen and obscure what is clear: namely that the AWS band is a new band that will create more competition and choice in the content space. New, innovative technology and services will be developed for this band that may or may not be available in the current PCS band.

MTS Allstream has also weighed in with a statement accompanying its submission:

Given recent developments in the industry, including the potential combination of the country’s two largest wireless carriers, the need for new entry to spur competition is more important than ever. Canada will benefit from more wireless competition, and a responsible AWS auction process is critical to helping Canadians get it.

The official paper file is in the hands of Industry Canada. Watch for political pressures and public advocacy over the summer months. As I sift through the filings, I’ll bring you some highlights.