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You can’t measure competitiveness or competitive intensity simply by looking at prices or counting the number of competitors. Measuring competitiveness in the telecommunications industry can be complex and may involve multiple factors.

In a recent interview, the CEO of telecommunications supplier Ericsson said that Europe’s industry structure is “probably unsustainable”.

Börje Ekholm told CNBC, “I do believe Europe needs to consolidate.”

Mr. Ekholm said that in countries such as the US, China and India, consolidation had meant there were now just two or three operators nationwide. In Europe, he said there are “200 operators, pretty much four plus in almost every country. It is an industry structure that is probably unsustainable and that needs to be addressed.”

The issue is one of financial viability. “The big problem in Europe is really that our customers can simply not afford to build out the networks and I think that is going to hurt European competitiveness long term.”

As Ericsson’s CEO suggests, telecommunications is an economic enabler. Absent the macro economic conditions to encourage investment in networks, the overall competitiveness of the national economy can suffer. Protecting competition doesn’t mean protecting the number of competitors.

Once again, the words of previous Minister Navdeep Bains come to mind.

So our government understands that Canadians want three things from their telecom services.

• Quality. Is the service fast enough to do what I want it to do?
• Coverage. Is the service available where I want it to be?
• and lastly, Price. Is this service affordable?

These three areas are clearly where providers need to compete and that’s why our Government is doing our part to promote competition and investment.

In “Quality, Coverage And Affordable Prices”, I wrote, “There is a difficult tension in these objectives, seeking increased investment while maintaining, if not improving, affordability.”

How we approach and achieve these 3 outcomes: quality, coverage, and price, is the way we should measure success in telecommunications competitiveness.

The CRTC has launched yet another consultation, saying “its current approach is not meeting its objective of encouraging more competition in the Internet services market.” Telecom Notice of Consultation (TNC) CRTC 2023-56: Review of the wholesale high-speed access service framework, starts off with an immediate (interim) reduction in existing wholesale rates “that reflects a 10% decrease in the costs of traffic-sensitive components”. Revised tariffs are due March 17.

The Commission invites comments on several issues, including its preliminary views that (i) the provision of aggregated wholesale HSA services should be mandated; (ii) access to fibre-to-the-premises (FTTP) facilities should be provided over these services; and (iii) the provision of FTTP facilities over aggregated wholesale HSA services 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.

The first round of comments are due April 24.

I will have more comments on this proceeding over the coming weeks and months.

In the meantime, I’ll close with this observation (that I have cited previously). Dr. Christian Dippon has written, “Quite simply, a market cannot both be noncompetitive and offer some of the best mobile wireless services in the world.” The comment is as relevant for wireline as it is for wireless.

As I did with the last Policy Direction, I thought it would be interesting (and helpful) to look at how the direction changed from the draft version proposed last May until the final version issued today (February 13).

Additions since the draft are underlined; deletions are marked by strikethrough.

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Direction

Direction and Key Objectives

Direction

1. In exercising its powers and performing its duties under the Telecommunications Act, the Commission must implement the Canadian telecommunications policy objectives set out in section 7 of that Act in accordance with this Order.

Key objectives

2. The Commission should consider how its decisions can promote competition, affordability, consumer interests and innovation, in particular the extent to which they would
   1. encourage all forms of competition and investment;
   2. foster affordability and lower prices, particularly when telecommunications service providers exercise market power;
   3. ensure that affordable access to high-quality, reliable and resilient telecommunications services is available in all regions of Canada, including rural areas and Indigenous communities;
   4. enhance and protect the rights of consumers in their relationships with telecommunications service providers, including rights related to accessibility;
   5. reduce barriers to entry into the market and to competition for telecommunications service providers that are new, regional or smaller than the incumbent national service providers;
   6. enable innovation in telecommunications services, including new technologies and differentiated service offerings; and
   7. stimulate investment in research and development and in other intangible assets that support the offer and provision of telecommunications services.

Principles of Effective Regulation

Transparency, predictability and coherence

3. The Commission should ensure that its proceedings and decisions are transparent, predictable and coherent.

Efficiency and proportionality

4. The Commission should ensure that the measures that it imposes through its decisions are efficient and proportionate to their purpose.

Market monitoring, research and strategic foresight

5. The Commission should further develop strong and timely market monitoring, research and strategic foresight skills and use the results that it obtains from these activities in the exercise of its powers and the performance of its duties.

Decisions based on sound and recent evidence

6. The Commission should base its decisions on sound and recent evidence and should exercise its powers to obtain necessary evidence.

Timely proceedings and decisions

7. The Commission should conduct proceedings and issue decisions in a timely manner, in recognition of the need for market clarity. The Commission should consider whether adopting new processes or engaging external experts would help reach this objective.

Decisions of an economic nature

8. In making decisions of an economic nature, the Commission should balance, in addition to any other objectives the Commission considers relevant in the circumstances, the objectives of
   1. fostering competition;
   2. promoting investment in high-quality networks;
   3. improving consumer choice;
   4. supporting the provision of innovative services; and
   5. encouraging the provision of services at reasonable prices for consumers.

Considerations for Fixed Internet Competition

Regulatory framework

9. In order to foster fixed Internet competition that is sufficient to protect the interests of users, the Commission must
   1. maintain a regulatory framework mandating access to wholesale services for fixed Internet;
   2. monitor the effectiveness of the framework; and
   3. adjust the framework as necessary and in a timely manner, including by making proactive adjustments.

Aggregated wholesale high-speed access service

10. The Commission must mandate the provision of an aggregated wholesale high-speed access service – that is additional to any other types of wholesale high-speed access services that are mandated – until it determines that broad, sustainable and meaningful competition will persist even if the provision of an aggregated
    service is no longer mandated.

Variety of access speeds and costs

11. The Commission must mandate the provision of wholesale high-speed access services with a variety of speeds, including low-cost options in all regions, and should not allow in all regions, and should not allow for the discontinuance purpose of such services if this would eliminate ensuring affordable options for consumers while allowing for the modernization of networks.

Tariff setting

12. The Commission should set interim and final tariffs more expediently, including by reforming the tariff-setting process and considering external expertise or international best practices.

Equitable application of regulatory framework

13. The Commission should ensure that its regulatory framework mandating the provision of wholesale high-speed access services for fixed Internet applies equitably to carriers that are subject to the framework.

Considerations for Mobile Wireless Competition

Mobile wireless competition

14. In order to foster mobile wireless competition that is sufficient to protect the interests of users, the Commission must
    1. maintain a regulatory framework mandating access – at just and reasonable rates – to wholesale roaming services;
    2. monitor and assess the effectiveness of its approach to a mandated wholesale facilities-based mobile virtual network operator access service, considering factors such as the specific characteristics of lower-density or remote regions and how these characteristics affect the time needed to deploy wireless networks; and
    3. adjust the facilities-based approach, referred to in paragraph (b), including by extending the duration of the mandate to provide the service, if the Commission determines that it is necessary.

Revision to approach

15. The Commission should revise its approach to encourage broader service-based competition if the effectiveness of the approach in fostering mobile wireless competition is lessened due to changes in the mobile wireless market structure or circumstances of competition.

Periodic review and adjustments

16. The Commission should
    1. periodically review the effectiveness of its mobile wireless services regulatory framework in meeting its objectives and, in doing so, consider factors that could harm competition, such as coordinated conduct between carriers; and
    2. make any necessary adjustments to the framework.

Approach to Consumer Matters

Consumer rights

17. The Commission must enhance and protect the rights of consumers in telecommunications markets by
    1. strengthening the ability of the Commission for Complaints for Telecom-television Services to better fulfill its mandate, including by
       1. increasing its operational capacity,
       2. ensuring that the perspectives of consumer and civil-society groups are better reflected in its governance,
       3. improving compliance with its rules, and
       4. increasing public awareness of its complaint-resolution process;
    2. strengthening the position of consumers in their relationships with service providers, including by
       1. taking additional measures to protect consumers from unacceptable sales practices, such as the measures identified in the Commission’s Report on Misleading or Aggressive Communications Retail Sales Practices,
       2. adjusting its consumer codes by harmonizing the provisions of the Commission’s its codes if doing so would be advantageous to consumers and providing for consumer protection measures in the event of a service outage or disruption,
       3. taking measures to promote clarity and transparency of pricing information and service plan characteristics in service providers’ marketing materials, and
       4. taking measures to ensure that consumers can promptly, affordably and easily cancel, downgrade, transfer or otherwise change their services;
    3. proactively identifying, removing and preventing barriers relating to telecommunications services, in particular for persons with disabilities; and
    4. regularly collecting, reporting publicly and making available to consumers information about relating to mobile wireless coverage and fixed Internet services, including in relation to performance and mobile coverage service quality metrics during peak periods and any other information that the Commission considers to be in the public interest, by
       1. requiring that service providers regularly test participate in the testing of the performance of their fixed Internet services, including services based on commonly used technologies in rural areas, and
       2. developing and implementing a standardized and robust approach for reporting mobile wireless coverage.

Measures Supporting Deployment and Universal Access

Universal access

18. The Commission should continue to take measures, in concert with other government measures, to support the objective of universal access to high-quality, reliable and resilient fixed Internet and mobile wireless services, including the following measures:
    1. continuing to administer a funding mechanism, making any adjustments that the Commission determines are necessary; and
    2. mandating improved access to support structures, such as telephone poles and conduits, as well as identifying and addressing other barriers to timely deployment of telecommunications networks, such as exclusionary practices and unreasonable administrative practices.

Funding mechanism

19. When the The Commission must, when it reviews its funding mechanism, it must consider whether to prioritize funding for mobile wireless services and operating costs of telecommunications networks in order to promote foster
    1. improved access to, and more affordable prices for, retail telecommunications services in underserved areas; and
    2. better coordination of public funding.

Considerations

20. In considering measures to take under For the purposes of sections 18 and 19, the Commission must take into account evolving
    1. technologies;
    2. service-performance needs; and user needs; and
    3. gaps in telecommunications network services.

Effect of Order

Effect

21. This Order is binding on the Commission beginning on the day on which it comes into force and applies in respect of matters pending before the Commission on that day.

Repeals

22. The following Orders are repealed:
    1. the Order Issuing a Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives; and
    2. the Order Issuing a Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives to Promote Competition, Affordability, Consumer Interests and Innovation.

Last week at The Canadian Telecom Summit, Ericsson released a new consumer study claiming “Canadian consumers are ready to bring 5G into the mainstream as four million smartphone users plan to upgrade to 5G services over the next 12-15 months.”

Ericsson ConsumerLab conducted the global consumer study interviewing 49,100 consumers in 37 markets (including 1200 in Canada) between April and July 2022.

The study highlights six key 5G trends, suggesting how communications service providers can respond to the expectations of early adopters as well as the next wave of consumers, driving further 5G adoption:

1. Consumer 5G adoption to be inflation-resilient
2. 5G is being adopted by a new wave of users with higher expectations
3. Perceived 5G availability is emerging as the new satisfaction benchmark
4. 5G is pushing up usage of enhanced video and augmented reality (AR)
5. 5G monetization models are expected to evolve
6. 5G adoption is paving the path to the metaverse

Relevant to the 3rd trend, the study found that 5G population coverage in Canada has reached 75% but only 33% of Canadian 5G users perceive being connected more than 50% of the time.

According to Ericsson Canada,

Six in 10 Canadian survey respondents said they want 5G plans to offer more than just gigabytes. Consumers are looking for more tailored network capabilities like application enhanced connectivity rather than best effort 5G, which has itself improved measurably this year with rollout of Mid-Band spectrum. This demonstrates the new business model opportunities the next wave of 5G presents for service providers by bundling digital services and focusing on quality of service for demanding applications like gaming and extended reality (XR).

This study is reportedly the largest global 5G-related consumer survey in the industry to date, and the largest consumer survey conducted by Ericsson on any topic.

And yesterday, Ericsson released its November Mobility Report [pdf, 2.6MB] that looks back at the growth of the wireless industry in 2022 and reveals key predictions and trends looking toward 2028. Ericsson observed that 5G continues to scale faster than any previous mobile generation: “5G subscription uptake has been faster than that of 4G, with 5G expected to reach 1 billion subscriptions 2 years sooner than 4G.”

Key drivers are said to include the availability of devices from multiple vendors, with prices falling faster than for 4G. North America and North East Asia continue to see strong 5G growth, with 5G subscription penetration in the regions expected to reach about 35 percent by end of 2022.

According to Ericsson, almost 230 Communications Service Providers have launched 5G services, with more than 700 5G smartphone models announced or launched commercially.

Two reports from Ericsson to add to your December reading list.

A few weeks ago, I wrote about the last webinar of the year from the International Telecommunications Society, “Comparing International Approaches To Spectrum Policy” that took place last week (video reply is available here).

In the chat room, one of the attendees referred to a relatively recent GSMA report, “The impact of spectrum prices on consumers”, published in September 2019 [pdf, 2MB]. That report included these recommendations:

1. Maximising revenues from spectrum awards should no longer be a measure of success;
2. Auctions can deliver inefficient outcomes when poorly designed;
3. Artificially limiting the supply of spectrum, including through set-asides, risks slowing services and inflating prices;
4. Spectrum should be released to the market as soon as there is a business case for operators to use it;
5. Policymakers should work with stakeholders to enable timely, fair and effective spectrum licensing to the benefit of society

The webinar provided some valuable academic perspectives on various approaches to spectrum policy, examining factors that can impact consumer outcomes, such as prices, service quality and coverage.

There was an observation from Helaina Gaspard of University of Ottawa’s Institute of Fiscal Studies and Democracy that I found to be especially interesting: “Canada wants to improve connectivity but there is no policy mechanism, formal or informal, that assesses whether spectrum policy is delivering against the government’s overall objective for ubiquitous coverage”.

Indeed, shouldn’t we ensure that the outcomes of spectrum policy delivers against the theoretical objectives that form the basis of those policies? Whether it is set-asides, the choice of spectrum tiers or other conditions selected as part of the policy framework for each spectrum band, how do we measure success?

I’d like to follow up on the passing reference I made recently to structural separation in my post about Australia’s broadband quagmire, the $50B government sinkhole known as NBN.

Structural separation is the regulatory theory that posits better consumer outcomes will be achieved if regulations require a separation between the builders of telecom network infrastructure and the retailers of telecom services. The theory is that the infrastructure company will have incentives to invest all of its energy in building better networks, and the various retail service providers will compete on an equal footing to deliver service excellence.

Two and a half years ago, at a meeting of Parliament’s Industry Committee (INDU), the British model was identified by Canadian Conservative MP Michelle Rempel Garner as an potential example for Canadian telecom policy. Tony Geheran, Chief Operations Officer at TELUS told the Committee, “I haven’t seen that work anywhere globally, to sustainable effect.”

At the time (May 19, 2020), I noted “Ofcom is showing that broadband speeds in the UK increased 18% between 2017 and 2018 to reach 54.2 Mbps. According to the CRTC, average speeds in Canada reached 126.0 Mbps by the end of 2018, an 89% increase over 2017.”

A year later (May 19, 2021), I provided an update: “According to Ofcom, “the average download speed of UK residential broadband services increased by 25% since 2019, from 64 Mbit/s to 80.2 Mbit/s.” According to the CRTC, at year-end 2019, 18 months ago, the average download speed in Canada was already 176.9 Mbps, more than double the current speed in the UK.”

Some recent articles show that the situation hasn’t improved for those in the UK. A recent article in the Financial Times says “almost a hundred smaller alternative networks — or “altnets” — have emerged with the goal of laying fibre as quickly as possible to attract customers frustrated by their existing service”. As it turns out, these “altnets”, such as Virgin Media O2 and the UK’s largest altnet, CityFibre, have argued against BT OpenReach lowering its wholesale prices, claiming the move would be uncompetitive.

The CRTC is reporting Canada’s average download speed was 220.4 Mbps by year end 2020, two and a half times what the UK regulator has observed.

Structural separation isn’t a solution. As Tony Geheren told INDU in May of 2020, “if you look at the UK, they are wholesale moaning about the quality of their infrastructure, their lack of fibre coverage. across what is a very small geography. I know. I originated from there. And quite frankly, the Canadian networks are far superior in coverage and quality and performance through COVID has demonstrated that.”

The Canadian model, creating a policy environment that encourages private sector investment in competitive infrastructures, means that most Canadians can choose from multiple suppliers of broadband access. It is a framework that has delivered better broadband for more Canadians than the structurally separated policies in the UK and (as discussed a few weeks ago) in Australia.

Canada’s future depends on connectivity.