Search Results for: incentives to invest

After watching the Federal Government’s Parliamentary Standing Committee on Industry, Science and Technology (INDU) May 7 meeting, Greg O’Brien wrote a commentary entitled “Federal committee nothing but bluster”.

“There’s a waste of two hours,” he wrote. “Not just my own time. Everyone’s.” Later on, Greg writes “You’d think they would want to get to the point, let witnesses speak, maximize their time with a number of good questions. Nope. Maximum windbaggery is what I saw”.

I’m certain we both had higher hopes for last Thursday’s (May 14) meeting, when representatives from Rogers, TELUS, Cogeco and Xplornet were witnesses. I came away shaking my head.

While some productive discussion emerged, too much time was spent by Parliamentarians apparently building transcript materials to show off to constituents and future voters. As stated by Chair Sherry Romanado (MP – Longueuil—Charles-LeMoyne) at the beginning of the video record on “ParlVu”, the meetings are being held “for the purpose of receiving evidence concerning matters related to the government’s response to the COVID-19 pandemic.” Starting on April 23, there have been 7 such video conference meetings so far.

The meetings have evolved to become a forum for issues related to accelerating the deployment of broadband access in rural and remote parts of Canada. This has given rise to Michelle Rempel Garner’s May 7 release of the ‘not ready for prime time’ Conservative caucus “Connect Canada” plan, and NDP MP Brian Masse’s release of the “NDP Plan for High Speed Broadband Internet for all Canadians” just prior to the May 14 Committee meeting.

The opposition parties created their plans prior to hearing from witnesses, many of which are in the business of building and operating networks. That is disappointing enough. But Canadians should watch the performance of their parliamentarians in committee. How many would approve of a methodology that sees plans developed and conclusions drawn well in advance of gathering evidence?

For example, the opening remarks by Rogers for Business President Dean Prevost included this testimony that could have provided guidance for the plans [17:30:25]: “Unfortunately, where we do not have high capacity, high speed wireline networks, we are not able to provide unlimited wireless data for internet access at home at this time. Put simply, wireline networks have 50-200 times the capacity per consumer as rural wireless mobile networks. Removing datacaps would simply overwhelm the mobile wireless network, impairing service for everyone in that area, including the first responders and 9-1-1 services that rely on it.”

During last Thursday’s meeting, I was particularly disturbed by a couple exchanges between Calgary-Nose Hill MP Michelle Rempel Garner (‘MRG’) and TELUS Chief Customer Officer Tony Geheran (‘TG’).

We witnessed this exchange at 6:31 pm:

MRG: “Mr. Geheran, I think I am saying your name right. You made a comment tonight. You said ‘if you have a policy that fundamentally undermines an investment strategy, you have to change policy’ and I think I agree with that. So I’d start with saying, do you think that structurally separating the builders of network from Internet Service Providers is a way to solve the policy tension that I just described?”

TG: “No, I don’t. I haven’t seen that work anywhere globally, to sustainable effect.”

MRG: “It’s in the UK, right?”

TG: “Yeah.”

MRG: “It’s like the primary model in the UK.”

TG: “But 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.”

MRG: “Well, that’s certainly not what we’re hearing in our offices from end users and that’s not the reality that we’re hearing in testimony tonight from you.”

I’m not sure the Honourable Member actually heard contradicting testimony that night. Perhaps she was confusing meetings.

So, I went off to find some independent sources to figure out what is actually going on in the UK. If the Committee members want independent corroborating evidence for Mr. Geheran’s perspective, they too can check with the independent regulators in Canada (the CRTC) and the UK (Ofcom). It didn’t take much effort to find information on the respective regulators’ websites.

Just a few weeks ago, in its April 24 Notice of Consultation reviewing its approach for rates for wholesale telecom services, the CRTC wrote “Ofcom has identified the lack of incentives to invest in new broadband networks, including full-fibre networks, as one of the key challenges facing the U.K. telecommunications industry.” Just 3 weeks ago, Canada’s regulator stated that the one of the key challenges facing the UK regulator was its lack of incentives to invest, just as Mr. Geheran had told Ms. Rempel Garner.

For verification of quality differences, there is plenty of data in the most recent annual reports from both regulators. For example, 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.

Or, the members of the committee could take a look at the Insights section from Ookla speed test results, which show Canada’s April 2020 wireline average at 118.11 Mbps for downloads and upload average at 51.80 Mbps. In the same period, wireline users in the UK were getting roughly half the download speed at 67.23 Mbps and about a third of the upload speed (18.28 Mbps).

When the Hon. Member from Calgary Nosehill said “that’s certainly not what we’re hearing in our offices from end users and that’s not the reality that we’re hearing in testimony,” the independent evidence supports ‘the reality’ portrayed by Mr. Geheran.

If they are hearing otherwise, the committee might want to take more time listening to different witnesses. Recall the opening of the meeting, where we hear that this inquiry was “for the purpose of receiving evidence”.

How would you interpret “receiving evidence”? Listening? Probing? Researching? Learning?

Instead, what we, the Canadian voters, have witnessed so far appeared to be parliamentary puffery.

A more evidenced-based approach is warranted.

Which of my blog posts attracted the most attention in 2019?

Looking at the analytics, these 5 articles had the most individual page views:

1. “Retooling Rewheel’s reports” [July 15th, 2019]
2. “A cautionary tale of political interference” [October 7, 2019]
3. “Where do you think the money comes from?” [August 22nd, 2019]
4. “The economics of Canadian telecom” [December 11th, 2018]
5. “Supporting junk science” [March 11th, 2019]

In fact, “Retooling Rewheel’s reports,” the post about the NERA Economic Consulting’s report saying policy makers and regulators should ignore the ‘fatally flawed’ Digital Fuel Monitor (by Finland’s Rewheel Research), was one of my most viewed pieces of all time.

I should give an honourable mention to “Maintaining incentives to invest” [March 4th, 2019] and “Better data leads to better policy making” [January 28th, 2019].

Some of my posts from the past were apparently being used as reference materials, such as “The Inside Wire: CRTC rules on telecom carrier access to buildings” [July 1, 2003] and “Unplug the digital classroom” [October 7, 2012]. I am happy to see that my archives are providing some value, in some cases more than 15 years later. Take some time to poke around through the archives found in “My back pages”.

Thank you for following me here on this blog (and on Twitter) and engaging over the past year.

Let me extend to you the very best wishes for health, happiness and peace over the holidays and in the year ahead.

Before I went on vacation, I left a few posts to whet our appetites in anticipation of today’s filing of a report by the Competition Bureau. In “Climbing the ladder of investment” [November 12, 2019], I provided a number of quotations endorsing facilities-based competition from the past quarter century of Canadian regulatory proceedings. In “Do market results rule out the need to mandate MVNOs?” [November 18, 2019], I cited a report from Scotiabank that said “regulators face a delicate act of balancing competition and investment incentives. A wrong move could have years of unintended consequences.”

In its follow-up comments to the CRTC [pdf, 2.4MB and Matrix report, 3.0MB], the Competition Bureau withholds a wholesale endorsement of mandated MVNOs, instead recommending additional measures to support regional facilities-based competitors to derive the greatest consumer benefits. Indeed, the Bureau observed that MVNOs may drive lower prices and greater choice, but also could threaten the “progress in enhancing competition in this industry to date.”

While MVNOs can have positive effects on pricing in the marketplace, they are unlikely to deliver the benefits of sustained and vigorous competition that facilities-based wireless disruptors are capable of providing. The Bureau is concerned that the introduction of MVNOs would disproportionately affect these wireless disruptors, putting at risk the positive effects that they have had on pricing, and may impact long-term incentives to invest in high-quality networks in Canada.

Instead, the Bureau recommended that the CRTC should adopt policies focused on incentivizing and accelerating facilities-based competition from disruptors.” It suggests such measures as mandated seamless handoff, more effective tower sharing and site access rules, and updated roaming rates.

The submission by the Competition Bureau appears to agree with my November 18 post, saying “there are promising signs that policies aimed at promoting facilities-based competition are paying dividends.”

Further, the Bureau wrote “All else equal, facilities-based competition is the most sustainable and effective form of competition.” Further, the Bureau observed “A broad MVNO access criteria may also deliver competition, but at a cost.”

As the Bureau concludes, “[facilities-based] competition has not yet reached its full potential and a mandated MVNO policy applied broadly risks undermining the steps taken by wireless disruptors, without much certainty that the MVNO policy will significantly decrease pricing.”

As I indicated in last week’s post, “Scotiabank believes the filing by the Competition Bureau will carry significant weight.” Rather than supporting the CRTC’s call for mandated wholesale services for MVNOs, the Bureau is endorsing measures aimed at accelerating and expanding competition from existing market participants, thereby promoting a climate that supports continued network expansion and investment. That appears to reaffirm support for a model of facilities-based competition.

Earlier this month, I wrote about “Maintaining incentives to invest,” asking how a change in regulatory framework might impact investment levels by incumbents and the regional carriers. What are the broader economic impacts of Canada’s mobile industry?

Earlier today, the Canadian Wireless Telecommunications Association (CWTA) released a report [pdf, 0.5MB] prepared by Nordicity that examines “The Benefits of the Wireless Telecommunications Industry to the Canadian Economy in 2017”. This is the 10th annual version of the report.

Nordicity found:

• In 2017, Canada’s wireless industry contributed $27.5 billion to the Canadian GDP, an increase of 9.1% from $25.21 billion 2016.
• The major contributor to this overall GDP increase was the $1.22 billion increase in the contribution of wireless network operators to the GDP.
• The wireless sector generated 151,550 full-time equivalents (FTE) jobs in 2017, including direct, indirect and induced effects — an increase of 13,500 FTEs or 9.8% from 2016.
• Canadian facilities-based network operators made capital investments in Canada’s wireless infrastructure totaling $2.92 billion in 2017 — an increase of $0.34 billion or 13.2% from 2016.

Robert Ghiz, President & CEO of CWTA, will be speaking at The 2019 Canadian Telecom Summit, taking place June 3-5 in Toronto. Have you registered yet?

According to the Montreal Economic Institute (MEI), the CRTC has outlived its usefulness.

“Since Canada has successfully transitioned from monopoly to competition, there is a case to be made that the CRTC should be phased out as Canada’s telecommunications regulator.” That is one of the conclusions of the 5th annual edition of “The State of Competition in Canada’s Telecommunications Industry,” released today by MEI [pdf]. Instead of a sector specific regulator, the report says oversight of the telecommunications industry could move to a more general regulatory framework under competition law.

The report also contends that, despite what it calls “simplistic and misleading” comparisons, Canadian wireless prices are competitive.

“The average bill that Canadians pay for their wireless and internet services keeps increasing not because they have to pay more for the same services, but because they are paying more for more and better services.” The MEI report cites numerous international metrics that Canada has some of the highest quality wireless networks in the world, and comparisons of prices rarely account for service quality.

According to the report, “Wireless carriers in Canada invested on average US$78 per connection between 2010 and 2016, almost twice as much as their European counterparts, which only invested $40.”

Looking at the regulatory framework, the report observes, “The main concrete difference so far between the FCC’s and the CRTC’s approaches to net neutrality has been the steadfast opposition of the Canadian regulator to zero-rating. … In banning innovative and pro-competitive targeted pricing plans, the CRTC has not protected the integrity of the internet; rather, it has raised prices for certain consumers and lowered prices for no one.” This is a familiar refrain to my readers for whom I have made the same observation over the years.

A little over a week ago, I asked on Twitter “What if #CRTC had given market forces a chance to work?”

MEI points out the irony of the CRTC, having an agenda of increasing competition in Canada’s wireless marketplace, ended up banning an innovative pricing plan from a new entrant (Videotron). According to MEI, that ultimately hurts Canadian consumers. Similarly, the report takes aim at the CRTC’s overly prescriptive Wireless Code as having “reduced consumer choice and limited the ability of carriers to develop innovative customer offerings.”

In this instance — as in many others — Canadians would have been better off if the CRTC had relied on market forces instead of attempting to manage the competitive process.

The report points to the December 2017 wireless price war sparked by Freedom Mobile’s $50 per month 10GB plan as evidence of the market’s competitiveness. Quoting the 12-year old report of the Telecom Policy Review Panel (TPRP), MEI says “the Canadian telecommunications industry has evolved to the point where market forces can largely be relied on to achieve economic and social benefits for Canadians, and where detailed, prescriptive regulation is no longer needed in many areas.”

It has been more than 12 years since the TPRP’s report was issued and, as discussed above, the CRTC has shown few signs of restraint in its approach to telecommunications regulation. While it has abandoned its prior focus on retail regulation, it has also expanded mandatory network access schemes, created policies that dull incentives to invest, and rewarded product imitators instead of product innovators. If maintained, these policies are bound to hurt Canadian consumers in the long run.

…

Although dismantling Canada’s telecommunications regulator might meet with stiff opposition from partisans of continued heavy-handed regulation, it would be of net benefit to Canadian consumers and to Canada’s economy. The CRTC—while a necessary actor in Canada’s telecommunications landscape during the transition from monopoly to competition—has outlived its usefulness.

No doubt, the assertions made in the MEI report will feature prominently in the Regulatory Blockbuster at The 2018 Canadian Telecom Summit, taking place June 4 – 6 in Toronto. The Regulatory Blockbuster will feature leading advocates from Bell, TELUS, Rogers, Teksavvy and Ice Wireless.

Have you registered yet?

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[Update: May 8, 11:50am] The MEI report author has an opinion piece on the Financial Post website, entitled “The CRTC should celebrate its 50th birthday by giving up telecom regulations entirely” with the caption “Martin Masse: You may be wondering why exactly we still need a dedicated telecommunications regulator. We don’t”.