Search Results for: incentives to invest

David Paddon of The Canadian Press has a story on the wires providing a preview of one of the concurrent panels taking place Monday (June 16) at The 2014 Canadian Telecom Summit.

The Winnipeg Free Press version of the story is titled “Canada’s wireless policies has left industry skeptical: summit organizer“. It features our Competition in Telecom panel, “a panel of academics and other economists who will debate whether governments can actually create sustainable competition through their regulatory policies.”

As I am quoted, “On one hand, you might have lower prices. On the other hand, you may have reduced incentives to invest in new technology.”

We are expecting a lot of media coverage this year from the global business press, industry newsletters and websites. BNN-TV will be on site and CPAC is recording a few of the keynote addresses and panel discussions for broadcasting later this summer.

Paul Bagnell of BNN had a preview of highlights he is looking forward to hearing at the event. You can read his blog post and watch his clip on the BNN website. Paul is planning to interview a number of speakers throughout the day.

The Financial Post has an article this morning that also includes a preview of The Canadian Telecom Summit.

If you are interested in telecommunications, broadcasting and information technology, then you should be at The Canadian Telecom Summit. Check out the full program.

I look forward to meeting you there!

The University of Calgary School of Public Policy released an important paper today, providing what it calls the first study that assesses the state of competition in wireless services in Canada. Based on the authors’ analysis, “there is no evidence that there is a competition problem in wireless services in Canada.”

The paper takes aim at simplistic analysis that has led various critics to have accused the industry of being “woefully uncompetitive” and “dysfunctional and in desperate need of an overhaul.”

This paper establishes that there is not a competition problem in mobile wireless services in Canada. The government need not, and should not, intervene to promote competition on the basis that increased competition will lower prices; efforts to do so will likely be unsuccessful and inefficient.

The paper warns that in the long run, the effects of government intervention are likely to lead to “reduced investment, misallocated spectrum, lower quality, and perhaps even higher prices.”

Today’s report was authored by Jeffrey Church, a professor in the Department of Economics and the Director of the Digital Economy Program in The School of Public Policy at University of Calgary, together with Andrew Wilkins, a Research Associate in the School. Dr. Church has testified on behalf of the Competition Bureau in the 2006 CRTC hearing looking into Essential Services. Today’s report documents the results of a long standing research program in telecommunications markets and regulation in Canada. An OpEd that appeared in the Globe and Mail in early July provided a preview of some of the points that are expanded upon in today’s report.

Although it is 50 pages, the report is quite readable and it is an important scholarly contribution to the wireless policy debate. It directly targets naive claims that high ARPU and low penetration rates are evidence of an uncompetitive sector, saying “the facts are not consistent with this simplistic analysis.”

Those who single out high ARPU as an indicator that something is wrong with prices — and therefore competition — are fundamentally misinformed about the meaning of ARPU and why it is high in Canada.

The authors say that it is ill-advised for the government to try to enhance competition by committing to four competitors in every region, saying the policy is based on “unsophisticated and misinformed textbook economics — that more competitors are better — which is simply inappropriate for services where there are important economies of network size, including economies of scale and scope.”

Similar to ideas in a blog post I wrote a few weeks ago, the paper warns that low prices can lead to networks that are not funded sufficiently to support future generations of devices and services.

Efforts to create competition in the short run, that increase the number of carriers, will simply squeeze margins in the short run and likely will not be sustained in the long run, as carriers exit and consolidate to reduce competition and restore margins consistent with profitability and the natural limit. And, while consumers might gain in the short run from lower prices, everyone is likely made worse off in the long run from the misallocation of spectrum, reduction in scale of carriers, and reduction in incentives to invest from such intervention.

The authors recommend that the government should reverse course on policies that reduce or restrict incentives for investment by the incumbent carriers and their access to spectrum. Instead, the focus should be on measures that foster competition in investment and network characteristics, such as speed, reliability, and capacity.

The conclusion is that Canada does not have a problem with competition in Wireless, and steps being taken to artificially incent new competitors may provide short term pricing benefits but likely brings deleterious long term impacts.

Perhaps the Industry Minister could refer the question to the Competition Bureau for an assessment. That is Canada’s independent agency charged with ensuring “that Canadian businesses and consumers prosper in a competitive and innovative marketplace.”

With auction stakes measured in billions of dollars – as well as the possible negative impact on investment in digital infrastructure – should we be asking whether the Competition Bureau agrees with the presumption that policy measures to incent competition are appropriate?

The University of Calgary School of Public Policy report concluded there is no evidence of a competition problem in Canada’s mobile wireless industry. On such an important issue of sector competitiveness, will the Competition Bureau be engaged to confirm or reject this finding?

The CRTC has issued another update to Telecom Notice of Consultation 2009-261, which has been titled “Proceeding to consider the appropriateness of mandating certain wholesale high-speed access services.”

Today’s update, number 7, expands the scope and sets out a new schedule in order to incorporate the directions from Cabinet issued a week ago [Bell/TELUS Order and MTS Allstream Order].

The Order in Council states that the Governor in Council considers that the continued development and availability of broadband Internet infrastructure and services is important for Canadians and the Canadian economy. It notes that it is critical that the regulatory regime provide a cohesive, forward-looking framework that provides the proper incentives for continued investment in broadband infrastructure, encourages competition and innovation, and leads to consumer choice.

So, TNC-2009-261-7 reopens the paper proceeding and delays the oral hearings that had been scheduled to open in early January.

Specifically, the CRTC is seeking comments by February 8 asking:

1. the application of the existing essential service framework on a forward-looking basis such that it provides appropriate incentives for continued investment in broadband infrastructure, encourages competition and innovation, and leads to consumer choice; and
2. in the context of the discussion provided in response to A, above,
   1. whether the speed-matching requirement, mandating the provision of the high-speed access services under consideration, or mandating access to any new types of Internet access infrastructure does, or would, unduly diminish incentives to invest in new network infrastructure in general and, in particular, in markets of different sizes;
   2. whether, in the absence of the speed-matching requirement and the mandated provision of the high-speed access services under consideration, there would be competition sufficient to protect the interests of users;
   3. whether the respective wholesale obligations imposed on ILECs and on incumbent cable carriers are equitable or represent a competitive disadvantage; and
   4. whether the impact of these wholesale requirements unduly impairs the ability of incumbent telephone companies to offer new converged services, such as IPTV.

The hearings will now take place May 31-June 4, finishing up in time for everyone to attend The 2010 Canadian Telecom Summit, which opens on June 7. We are open through the holidays if you are looking to register early with your remaining 2009 budget.

As I was marking these days of reflection in the Jewish calendar, I found myself asking, where is the vision for Canada’s national digital strategy?

Sure, there is a Digital Charter, a pronouncement heavy on market intervention, following the tradition theme of “Tax it, regulate it, subsidize it”. But, the Digital Charter is light on how we drive increased national productivity. Where is the strategic vision?

When I look at the official mandate for the responsible federal agency, I read “Innovation, Science and Economic Development Canada’s (ISED) mission is to foster a growing, competitive and knowledge-based Canadian economy.” The department says its “raison d’être” is to work “with Canadians in all areas of the economy and in all parts of the country to improve conditions for investment, enhance Canada’s innovation performance, increase Canada’s share of global trade, and build a fair, efficient and competitive marketplace.”

It sounds good so far, but what is the strategy to achieve these bold objectives? It is somewhat trite to say that the department’s “raison d’être” – its very reason for being – is to improve investment conditions, enhance innovation performance, and build a fair, efficient and competitive marketplace.

How does the department plan to do that? Indeed, considering the current government has been in power for 9 years, how did the department plan to do that? Where is the strategy that has been guiding them?

Regulation in the absence of an overall strategic vision can be harmful. In rejecting Senate Bill 1047, the AI safety legislation, California Governor Gavin Newsom wrote: “Given the stakes – protecting against actual threats without unnecessarily thwarting the promise of this technology to advance the public good – we must get this right.” Arguments were made that the provisions of SB 1047 are too broad and could stifle innovation, and could hinder AI’s development itself.

I took a look at ISED’s Plans and Reports web page. There is a link to a “Science and Technology Strategy” and another link to “Canada’s S&T strategy”. The “Science and Technology Strategy” page is now archived. It dates back to the 2007, when the Conservatives were in power. The “Canada’s S&T strategy” also dates back to the Conservative era, publishing a report in 2014 (“Seizing Canada’s Moment: Moving Forward in Science, Technology and Innovation 2014”), and launching a consultation (“Developing a Digital Research Infrastructure Strategy”). The Digital Charter sets out 10 principles. Are we doing enough to tie these to the departmental raison d’être, to “improve investment conditions, enhance innovation performance, and build a fair, efficient and competitive marketplace.”

A lot of these government consultations produce reports that sit on shelves. But, isn’t it helpful to have a somewhat official strategy point of reference to guide the development of more specific objectives and tactics? When handing out billions of dollars in government subsidies, shouldn’t the Minister be able to point to a strategy document to justify certain priorities over others?

This isn’t the first time that I have come back from Rosh Hashana with broad policy reflections. Three years ago, I wrote “How did we get here? How do we move forward?” and wrote:

So, how did we get here?

A number of years ago, in “Digging ditches and digital policy”, I cited a paper from the Institute for Research in Public Policy that said “Like other countries, Canada is once again engaging actively and more openly in industrial policy. In fact, it has a profusion of industrial policies, what it lacks is a strategy.”

No clear strategy. No clear objectives. No scorecard for measuring progress.

What are we trying to accomplish? How do we measure success? As I have said many times [here and here], I would like to see us start with clear objectives: “Set clear objectives. Align activities with the achievement of those objectives. Stop doing things that are contrary to the objectives.”

How do we celebrate success in digital policy, if we aren’t clear about what we are trying to do?

How do we move forward?

If we want to create appropriate incentives for private sector investment, we can’t keep changing the rules (see: Calvinball). A recent essay on The Hub asks “what incentives do firms have to incur the risk and costs of investment in new network infrastructure if the government can later unilaterally grant access to their competitors at rates determined by regulators?” As the authors write, “The goal should be to create the conditions for investment, innovation, and technological development rather than micromanage the market to produce a particular number of market participants.”

Set clear objectives. Align activities with the achievement of those objectives. Stop doing things that are contrary to those objectives.

A few weeks ago, I wrote about competing visions for a digital future being laid out in the US. Where is the competing vision from His Majesty’s Loyal Opposition, Canada’s apparent government-in-waiting?

At some point, the Opposition Critics have become known as Shadow Ministers. Being a critic is important in a Westminister-style government. It is their role to hold the Minister to account. But, it is a lot easier to criticize than to develop policy and strategies from scratch. A Canadian election is coming at some point in the next year, and all signs point to a Conservative majority. Casting stones is a lot easier than gathering them together to build something. It’s even harder to build something that will endure.

For the past 9 years in opposition, we have heard what the Conservatives won’t do. It is time to transition from critics to leadership. Where is the vision for Canada’s digital future?

“Delivering on the Copper Decommissioning Promise” is the title of a recent Scotiabank report, issued as part of its Converging Networks 2.0 series. Frequent readers know that I have often cited Scotiabank research. I thought the bank’s September 13 report merits highlighting.

North American incumbent local exchange carriers (ILECs) have been aggressively deploying fiber within their territories over the last decade. These upgrades have delivered sizable improvements in market share, churn, average revenue per user (ARPU), and cost to serve. Canadian ILECs have been more aggressive than their US peers in rolling out fiber; hence, they have been able to deliver stronger wireline metrics. But what about the “holy grail” of copper decommissioning? TELUS Corporation is the most advanced on the copper decommissioning path within our coverage. Why is this relevant to investors, and when should we begin to bake value upside into these names? In this report, we explore some of the regulatory differences between the United States and Canada related to copper decommissioning and provide an update on fiber rollout and decommissioning plans for companies under our coverage. Bottom line, we believe regulators should encourage ILECs to decommission copper while also making sure to protect vulnerable customers. Fulfilling the copper decommissioning promise will provide additional incentives for ILECs to invest in network upgrades down the road.

As this paragraph notes, Canadian phone companies have been more aggressive than their US counterparts in deploying fibre. Scotiabank estimates that fibre represents about 60-65% of the Bell and TELUS total footprint, while Verizon is about 60%, Frontier is approximately 47% and AT&T has the lowest percentage, despite covering close to 28 million of its premises.

The copper migration by TELUS is seen as enabling monetization of the scrapped copper cables, as well as permitting redevelopment of real estate as central offices are converted. “The saved space inside COs is being rented to cloud companies to install servers.”

Of course, this raises the question of how regulators view the network evolution to fibre. In the US, the FCC has had rules in place for nearly a decade. The US regulator has a web-page describing how technology transitions could affect consumer services. In Canada, the CRTC has indicated “it will shortly address issues related to decommissioning practices through further process.” In its wholesale broadband decision last month, the CRTC added “In the interim, to ensure that consumers are not negatively affected, parties are expected to avoid instances where competitors could lose access to higher-speed aggregated HSA. Should such situations arise, the Commission is prepared to address them expeditiously on a case-by-case basis.”

Scotiabank said “We believe it will be important for the CRTC to not impede ILECs’ copper decommissioning initiatives, especially now that fibre to the home (FTTH) wholesaling will be regulated, while at the same time enforcing measures to safeguard users who need access to 911 services in case of power outages.”

Scotiabank noted two primary concerns with copper decommissioning: reduced competitive choice; and, emergency phone access during a power loss. Solutions exist to mitigate against each of these. The CRTC’s Telecom Regulatory Policy CRTC 2024-180: Competition in Canada’s Internet service markets, addresses the risk of reduced competitive choice by mandating fibre resale. Battery backup provides an option for emergency access, where customers do not have alternate means to call during a power outage.

The CRTC has a very full calendar of activities, so it is difficult to forecast the timing of a regulatory review of copper decommissioning policies. I’ll leave the topic with this caution from the Scotiabank report. “We understand why putting some guardrails in place for copper decommissioning is important; however, we hope that this review does not lead to a heavy-handed regulatory decision that would curtail ILECs’ drive to decommission their copper.”