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FCC Chairman Ajit Pai was unable to make it to Toronto for The 2017 Canadian Telecom Summit, but he sent a special video message, addressing the conference’s themes of Competition, Innovation and Investment and what the FCC is doing to promote each.

Greetings from Washington, DC, and thank you for this opportunity to address The 2017 Canadian Telecom Summit.

I’m sorry that I cannot be there in person. Mark Goldberg feels like a kindred spirit to me. He’s from Parsons, Kansas and moved to Toronto; I lived in Toronto and eventually moved to Parsons. And the last time I attended, I had the pleasure of listening to and learning from my good friend, former CRTC Commissioner Raj Shoan.

Let me begin by thanking our Canadian counterparts for your long standing friendship and collaboration on telecom issues. Our recent incentive auction is just the latest example. We jointly developed a uniform North American band plan for UHF TV signals and the new 600 MHz wireless band, paving the way for cross-border inter-operability of devices and networks. I look forward to continuing to work together to craft solutions that benefit Americans and Canadians alike.

Now, I see that the theme for this year’s Summit is Competition, Innovation and Investment, so I will take the radical step of talking about Competition, Innovation and Investment and what the FCC is doing to promote each.

Let me start with innovation. We begin with the premise that breakthrough advances are going to come from private sector entrepreneurs, not government policy makers. We want to empower inventors to bring their ideas to life. Now often that just means getting government out of the way. That also means promoting competitive markets and providing key inputs, like spectrum, that aid the incentives to create.

So, what exactly are we doing? For starters, we are reviewing the FCC’s rules across the board, from media to wireline, and deciding which ones still make sense in the digital age. As part of this review we are asking whether the costs of a rule outweigh the benefits. When the facts warrant, we won’t hesitate to revise overly burdensome rules or repeal them altogether. We’ve also put in place a process to ensure that, if an innovator seeks FCC approval of a new technology or service, we’ll make a decision within one year. That’s light-speed in our world.

We also began the process of allowing television broadcasters to use the next generation TV standard, ATSC 3.0, on a voluntary market-driven basis. This standard, which marries the best features of broadcasting and the internet, would allow broadcasters to fully enter the digital era.

On the spectrum front, we moved quickly to open up nearly 11 GHz of spectrum in the bands above 24 GHz for mobile use. This gives operators a clear path to launching 5G and other innovative millimeter wave services in the United States. And we’re currently considering opening up even more of this spectrum.

Now, as we move to 5G, regulators also must recognize something many people often don’t. Innovation isn’t limited to the so-called edge of networks. Innovation within networks is also critical, especially in the mobile space. To realize the digital future, we need smart infrastructure, not dumb pipes.

And that brings me to investment. For almost two decades, the FCC pursued a light touch approach to regulation, one that produced tremendous investment and innovation throughout our entire internet ecosystem, from the core of our networks to providers at the edge. But two years ago, the US Government’s approach suddenly changed. The FCC, on a party-line vote, decided to slap an old regulatory framework, called Title II (after the section of our statute where the rules are found) originally designed in the 1930’s for the Ma Bell telephone monopoly, upon thousands of internet service providers, big and small.

We’ve already begun to see the harms from this shift to more heavy-handed regulation. From 2014 to 2016, the broadband infrastructure investment in the United States dropped, the first decline ever, outside of a recession. Last month, the FCC voted to initiate a process to reverse the Title II decision and seek public input on how to secure the Open Internet that we all favour. I enter this process with an open mind, and we will go where the facts lead us, but I’m confident that this move puts us on the path to more broadband infrastructure investment, which would mean more Americans with high-speed internet access, more jobs building those networks, and more competition, the third topic that I wanted to discuss.

When it comes to competition, small ISPs are critical to meeting consumers hope for a more vibrant broadband marketplace and closing the digital divide. But the simple reality is that the smallest providers simply don’t have the means or the margins to withstand the Title II regulatory onslaught. Now, since we launched our proceeding, 22 small ISPs, each of which has about 1,000 broadband customers or fewer, told the FCC that the Title II order and utility-style regulation had affected their ability to obtain financing. They said that it had slowed, if not halted, the development and deployment of innovative new offerings, which would benefit our customers. And they said that Title II hung like a black cloud over their businesses.

In my first week as Chairman of the FCC, I proposed to relieve small ISPs from costly and overly burdensome reporting requirements associated with the Title II order. Reversing that Title II order altogether would encourage smaller competitors to enter the broadband marketplace or expand their networks. This would mean more competitive choices for the American people.

In short, America’s approach to broadband policy will be practical, not ideological. We’ll embrace what works, and dispense with what doesn’t. That means removing barriers to innovation and investment, instead of creating new ones. That means taking targeted action to address real problems in the marketplace, instead of imposing broad preemptive regulations. And that means respecting principles of economics, physics and law, and acting with humility as we regulate one of the most dynamic marketplaces history has ever known. This vision will unleash the massive investments that the digital world demands.

I am proud to reaffirm my nation’s commitment to promoting more competition, innovation and investment.

And I look forward to working with all of you to bring the benefits of the digital revolution to the people of Canada and the United States.

Thank you very much.

As the CRTC continues its process to develop a Code of Conduct for the Wireless industry, yesterday it released a draft Code working document, once again inviting the public to comment on it.

There is a section that caught my eye because of an inconsistency.

In Section D3, under the heading of “Contract cancellation, expiration, and renewal”, there is a complex paragraph that describes an option under consideration for the calculation of early termination fees (Option 2 of D3.3). I have inserted two additional line breaks to make the section easier to read:

Early termination fees may apply to fixed-term and monthly wireless services as follows.

{line break inserted}Fixed-Term Service: If the consumer received an economic incentive and cancels the fixed-term service before the end of the commitment period, the cancellation fee may not exceed the sum of (1) the price of the services provided up to the effective cancellation date, and (2) any remaining economic incentive balance. The service provider automatically reduces the economic incentive balance by an equal amount each month over the commitment period. This reduction equals the value of the economic incentive for that fixed-term service divided by the number of months in the commitment period, and the cancellation fee can therefore be calculated using the following formula: (Economic Incentive) x (Number of Contract Months Remaining/Total Months in the Contract).

{line break inserted} If the consumer did not receive an economic incentive and cancels their fixed-term service before the end of the commitment period, the cancellation fee will be the sum of (1) the price of the services provided up to the effective cancellation date, and (2) the lesser of $50 or 10% of the monthly rate for unexpired months of the commitment period.

I understand the payback of the economic incentive portion. In effect, the CRTC is setting up the free phone offer or the discount on a phone as a kind of zero interest payment plan over the life of the contract. If you leave the carrier early, then you have to pay the remaining balance on the device.

If you didn’t get a phone or other upfront incentive, then you have to buy-out the remaining term of the service commitment, by paying $50 or a 10% of the service fees times the number of months remaining.

But notice: there is no service penalty for customers who got an upfront incentive. They pay off the phone if they leave early, but they don’t have to pay an additional $50 or 10%  of the remaining balance on the service portion.

Why would you ever pay full price for a phone again? In fact, why would you ever buy a phone from anyone other than a phone carrier that offers a discount?

Was it the intent of the CRTC to end the sale of devices without subsidy, or did the CRTC fail to repeat the service portion of the early termination fee?

While some people may superficially view this as a consumer benefit, it is worth considering the alternative. View the device subsidy as a separate transaction from the service contract. Do you want the device “financed” by the carrier – no problem; or, shop around for the device – maybe the electronics stores will also offer financing or low enough prices to make the purchase from them more compelling. Then negotiate your services deal. Maybe you pay $5-10 a month less if you agree to a longer term contract and you separate the device discount from that discussion.

Would such a scenario lead to lower services prices for people who don’t get a new phone from the service provider with each contract?

The current reading of the termination fees could lead to unintended consequences that harms the sale of devices from independent electronics stores. These independent retailers help discipline the price of replacement phones, for those of us who drop them in the lake or leave them in the seat-back of planes.

Indeed, there could be a negative impact on the “no-contract” offers from alternate carriers that do not offer device subsidies. Will this ultimately lead to an increase in the price of devices?

Or was this just a typo?

Earlier this week, some reports suggested the EU is launching an investigation into internet traffic throttling and blocking. I read the source material differently. To me, this looks more like talk than action

First off, let’s remember that for the past 18 months or so, Canada has led the world in having an actual net neutrality regulatory framework in place.

The Associated Press reports that the EU has asked its member countries to investigate whether ISPs block or slow traffic in a way that harms consumers.

If national telecommunications regulators find that providers are not transparent enough about how they manage their services or make it too difficult for users to switch, the European Commission, the EU’s executive, may propose new legislation to protect the principle of “net neutrality.”

But there is already an acknowledgment from the EU that some traffic is OK to be managed:

In its report Tuesday, the Commission says “it is widely accepted” that providers have to slow down some services to allow others to work.

“A consumer’s experience is not affected if an email reaches him a few seconds after it has been sent, whereas a similar delay to a voice communication would cause it to be significantly degraded, if not rendered entirely useless,” the Commission said.

Another report suggests that the exercise may be to develop a “name and shame” list.

Be sure to review the actual releases from the European Commission, including the press release on ISP transparency, the briefing remarks, and the communication from the Commission to the European Parliament [pdf, 157 KB].

There is a recognition of the need to permit operators to determine their own business models, while seeking to offer consumers choice and the ability to easily switch service providers if they are not satisfied with their access to lawful content.

Any additional regulation should avoid deterring investment, or innovative business models, lead to a more efficient use of the networks and to creating new business opportunities at different levels of the internet value chain while reserving for consumers the advantages of a choice of internet access products tailored to their needs.

The briefing remarks seem to indicate that Commissioner Neelie Kroes would ideally like to see market forces used to enable consumer choice.

If I am not satisfied that consumers can counteract such practices by switching providers, I will not hesitate to introduce more stringent measures. That could be in the form of more prescriptive guidance, or even legislation if it is needed.

We’ll see how this investigation translates into new legislation or operator codes of conduct.

The Washington / London based law firm of Arnold & Porter has just released a paper [ pdf] that discusses recent developments in net neutrality in the United States. The piece is a chapter in an upcoming book: Telecommunications Laws and Regulations 2009.

The piece is an excellent review of the Comcast case in front of the FCC, presented with a history and a review of the jurisdictional questions.

According to the paper, the issue isn’t whether ISPs can manage their internet traffic. It cites a Federal Trade Commission, (the US federal regulatory agency with jurisdiction to enforce antitrust and consumer protection laws) report that said:

the use of bandwidth intensive applications like certain peer-to-peer file-sharing protocols by even a small minority of users is already consuming too many network resources as to be worrisome … [and] even a small portion of Internet users may effectively degrade service for the majority of end users.

Rather, the issue is whether those ISPs should be free to address this problem without government involvement to guard against improper limits on public access to the Internet content.

The advice to ISPs in the interim is to provide consumers with relevant information about limits on their use of their service, but it is unclear how much detail must be provided; and, to apply network management techniques that are “narrowly tailored” to meet the harms they are designed to address.

The Comcast case is far from over. As was noted in the Arnold & Porter paper, “the lack of a factual basis for the conclusion that Comcast was acting discriminatorily may prove problematic for the Commission.”

It would be nice to see a similar review of net neutrality in Canada. References, anyone?

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