Search Results for: incentives to invest

As governments increase intervention in internet content and services, I wonder if sufficient regulatory humility being applied.

A recent New York Times article noted, “As companies like Google and Facebook grew into giants in the early 21st century, regulators chose largely not to interfere in the still-young market for online services.” The concern was that regulatory intervention could restrict the development of innovative applications and new business models.

What has changed?

Many internet public intellectuals have long advocated for a free and open internet, which many interpreted as supporting a hands-off approach by governments. However, one of my first blog posts, way back in March 2006, looked at an article by Tom Evslin, in saying that he was another voice on “a lonely quest to try to partially tame the anarchy of the internet.a lonely quest to try to partially tame the anarchy of the internet.”

If the Internet is a law-free zone:

1. Governments can do whatever they want there including spying and blocking. It’s naïve and illogical to think that governments are governed by law in a free fire zone when no one else is.
2. Monopolies can do whatever they want including blocking competing services.
3. Malicious people are free to attack not only other sites but the structure of the Internet itself including its routers and domain name servers.
4. Threats, libel, and fraud gain immunity from investigation and prosecution by being carried out on the Internet.
5. The Internet becomes a river in which any conspirator can wade to avoid the bloodhounds of law enforcement.
6. There are no laws PROTECTING privacy in a law-free zone.
7. SPAM is as legitimate as any other activity.

The past decade and a half changed the way we look at the internet. We are more willing to have law enforcement in the digital world. As I have expressed before, my concern has been how we tailor new laws and how we define new standards of acceptable online behaviour.

We have laws developed for the analog world and a body of jurisprudence in their application. We have witnessed the failures of anti-spam and do not call legislation. Those laws curtailed activities by legitimate businesses but we continue to get nuisance calls and loads of unwanted emails. To an extent, instead of regulatory processes, we apply technology to suppress what the legislation was supposed to curtail. We target spam and malicious software with software in the networks and on our devices. Telecom networks are trying to target nuisance calls with technology.

Still, I wonder if the legislation suffers from over-reach. At the 2017 Canadian Telecom Summit, then FCC Chair Ajit Pai spoke about the need for regulatory humility:

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.

Every regulation, every piece of legislation risks creating harmful unintended consequences. Some regulations can serve as disincentives for investment, slowing down necessary expansion and upgrades to network infrastructure.

These days, it seems Canada’s Parliament never misses an opportunity to wade into some form of telecom regulation. Parliament crafted laws about somewhat trivial issues, apparently believing it can do better than the specialized independent regulator. As a result, there is legislation on the books mandating paper invoices in a digital world. Why isn’t that part of a regulator’s discretion?

A private member’s bill mandates service transparency that is already part of the the Minister’s policy direction. Recall, I recently wrote about risks arising from online harms legislation in various countries.

Politicians looking to score points with intervention in the digital marketplace should carefully reflect on whether new laws are actually needed. What problems are we trying to fix?

A little more regulatory humility goes a long way to minimize unintended consequences.

Allocating spectrum, the radio waves on which wireless technologies depend, is a multifaceted challenge for policy makers across the globe.

Each determination requires a balancing of interests: who should get to use radio frequencies; in what areas; for how long; for what purpose; under what conditions. Spectrum policy must consider consumer and corporate interests, and national economic policy.

Governments taking too much of a “hands-off” approach could lead to interference across spectrum bands, undermining valuable uses of wireless technologies; too much intervention could stifle innovation and competition by artificially raising prices, or allocating spectrum to operators with insufficient incentives or abilities to invest.

A couple of weeks ago, I noticed that New Zealand had once again decided to allocate mid-band spectrum to its 3 national mobile operators at no charge in order to help drive more rapid deployment of 5G. Two years ago, New Zealand cancelled its planned auction of 3.5GHz spectrum and simply assigned 40 MHz to Dense Air, 60 MHz to Spark, and 60 MHz to 2degrees. New Zealand’s approach stands as an interesting contrast to the multi-billion dollar spectrum auctions in so many other jurisdictions.

The International Telecommunications Society is hosting its final webinar of 2022, Driving Digital Transformation: International Comparisons of Spectrum Policy [pdf, 143KB] on November 15, 2022 at 9:30 am (Eastern).

Spectrum policy requires taking stock of international experiences to expand the pool of knowledge and identify global best practices. While no two jurisdictions are entirely alike, drawing on the global experience in the design of spectrum is critical to ensure that nations can benefit fully from their spectrum resources. Featuring four international experts, this webinar will compare international spectrum policies, including assignment mechanisms, deployment conditions, and governance frameworks. In doing so, these global experts will reveal lessons for governments and others involved in spectrum policymaking, as well as the implications for the global digital transformation.

The speakers are:

• Dr. Helaina Gaspard, co-founder and Director, Governance & Institutions, of the Institute of Fiscal Studies and Democracy (IFSD) at the University of Ottawa. Her work centres on key actors of fiscal ecosystems, while leveraging relationships with partners such as the World Bank, the National Governors Association, the OECD and the International Budget Partnership. The IFSD recently completed a report for comparing spectrum assignment mechanisms across countries.
• Dr. Marja Matinmikko-Blue, Research Director of Infotech Oulu Institute and Director of Sustainability and Regulation of 6G Flagship at the University of Oulu. She coordinated the writing of twelve 6G White Papers that were published and led the development of the White Paper on 6G Drivers and the UN SDGs. Marja has published over 170 scientific papers.
• Dr. Petrus Potgieter, Professor in Decision Sciences at the University of South Africa and a researcher at the Institute for Technology and Network Economics. He conducts research on the impact of new technologies to the economy, policy and society. Petrus is a board member of the ITS, and editorial board member of the Journal of Telecommunications Policy.
• Ms. Janette Stewart, senior spectrum expert at Analysys Mason, with 25 years’ experience in radio engineering, wireless technologies, spectrum policy and spectrum management. Prior to 2001 she worked for the UK Radiocommunications Agency (now Ofcom). Janette’s expertise lies in mobile, wireless and broadband technologies and markets.

Registration for the webinar is free.

The UK telecom regulator, Ofcom, has proposed to revise its guidance on how ‘net neutrality’ rules should apply, indicating that a more nuanced approach may be appropriate given the evolution of broadband technologies and the marketplace.

Since the current rules were put in place in 2016, there have been significant developments in the online world – including a surge in demand for capacity, the emergence of several large content providers such as Netflix and Amazon Prime, and evolving technology including the rollout of 5G. So Ofcom has carried out this review to ensure net neutrality continues to serve everyone’s interests.

Ofcom indicated that “the [current] net neutrality rules constrain the activities of the ISPs, [and] may be seen as restricting their ability to innovate, develop new services and manage their networks.” The regulator considered that this could lead to poor consumer outcomes, “including consumers not benefiting from new services as quickly as they should, or at all. These potential downsides might become more pronounced in the future, as people’s use of online services expands, traffic increases, and more demands are placed on networks.”

The consultation document [pdf, 1.5MB] is 139 pages long, plus an additional 62-page set of annexes [pdf, 917KB].

Ofcom is proposing:

• most zero-rating offers will be allowed;
• ISPs have flexibility to offer retail packages with different levels of quality;
• ISPs can use traffic management measures to manage networks;
• ISPs have more scope to develop specialised services, such as network slicing;
• Ofcom will not prioritise enforcement action where there is clear public benefit, in relation to:
  • the prioritisation and zero-rating of all communications with the emergency services;
  • traffic management of internet services provided on transport;
  • the use of parental controls and other content filters involving the blocking of traffic; and
  • blocking access to fraudulent or scam content.

Ofcom has also proposed additional reporting from ISPs to allow monitoring the effects of the increased flexibility being provided.

Ofcom is also seeking comment on providing greater flexibility for ISPs in certain areas that could generate positive consumer outcomes, but are not permitted under the current legislation, including: allowing zero-rated content to be accessed after a customer’s data allowance has been exhausted; allowing retail offers which guarantee different quality levels for traffic associated with specific content; and allowing greater flexibility to apply traffic management to specific content to address congestion.

Finally, Ofcom has provided views on “the possibility of allowing ISPs to charge content providers for carrying traffic that might lead to more efficient use of networks.”

We acknowledge that in principle there could be benefits to a charging regime, particularly in improving the incentives on CAPs to deliver traffic efficiently. However, we also recognise the difficulties that designing an effective scheme raises, the risks and uncertainty such a change could create, and the unclear impact on consumers. A charging regime would be a significant step and we have not yet seen sufficient evidence that such an approach would support our objectives at this time. We also consider our other proposals provide flexibility that should help mitigate several issues identified by ISPs.

Comments are due January 13, 2023. Ofcom says that it expects to issue its decision and revised guidance by Autumn 2023.

“We want to make sure that as technology evolves and more of our lives move online, net neutrality continues to support innovation, investment and growth, by both content providers and ISPs. Getting this balance right will improve consumers’ experiences online, including through innovative new services and increased choice.”

We have seen the expression “sustainable competition” used frequently in Canadian telecommunications policy circles.

In its rejection of an appeal on the CRTC’s Review of Wireless Services, just last month Cabinet said: “the Governor in Council considers that the Commission’s decision appropriately balances investment incentives to build and upgrade networks, and sustainable competition and the availability of affordable mobile wireless prices for consumers”.

The terms “sustainable” and variations like “sustainability” appear 29 times in that CRTC decision.

Which brings us to the Competition Bureau filing with the Competition Tribunal to block the merger of Rogers and Shaw.

As reported by Bloomberg, the application is somewhat “baffling”. According to the Bureau, the merger “is likely to prevent or lessen competition substantially in Wireless Services in Ontario, Alberta and British Columbia.” Further, the Bureau says “divestitures proposed by the merging parties are not likely to alleviate the substantial prevention or lessening of competition from the Proposed Transaction.”

What causes many analysts to scratch our heads is an implicit presumption in the Bureau’s arguments that ending the merger will result in Shaw continuing to invest in operating its wireless business.

The lede in the Bloomberg story captures the issue. “The antitrust case against Rogers Communications Inc.’s takeover of a rival is thousands of pages long but comes down to one core idea: the company it’s buying is too good. Analysts don’t see it that way.”

Effectively, the Competition Bureau appears to be saying that Shaw would never be allowed to sell Freedom Mobile, because there are synergies with Shaw’s wireline business, even though the mobile business wasn’t originally integrated with a wireline company when it launched or when Shaw bought it. That seems pretty extreme. Earlier this week, BMO Capital wrote “We believe an outright rejection of this deal would not satisfy the government’s position of a four-player market (i.e., Shaw will not keep funding wireless, that’s why they sold)”.

The Bloomberg article notes “while Freedom may be a tough competitor, analysts question how healthy it really is. Shaw is struggling to generate much cash flow from it.”

As I wrote on Monday, Brad Shaw told the Parliamentary Industry Committee that the status quo is not an option, as the level of investment required for wireless was beyond the ability of Shaw to undertake. While the Competition Bureau may be correct in saying that Freedom contributed to competition in the wireless market, it does not say how Freedom can sustain its past level of competition if the merger is blocked. Shaw has clearly concluded that it cannot.

This is not a unique occurrence. Market consolidation has been happening, or is under discussion, in the U.S., Europe, the UK, Asia and Australia. One of the reasons for consolidation is that remaining competitive is an expensive proposition. GSMA estimates that the deployment and ongoing costs of 5G will be up to 71% more expensive than previous network generations. If Freedom is to remain a competitive force, additional financial resources are required.

Blocking the merger does not maintain Freedom’s contribution to competition in the marketplace; it weakens it.

New investors have apparently stepped up, enabling the “merging parties” to propose a divestiture. The multi-billion dollar purchase price being reported in the media implies that these potential buyers have developed business plans that are attractive to their investors and are willing to undertake the investments necessary to compete.

The outcome of the merger review process, like the CRTC and Cabinet reviews of wireless services, needs to “balance investment incentives to build and upgrade networks, and sustainable competition and the availability of affordable mobile wireless prices for consumers.”

The Competition Bureau’s position disrupts that balance, risking the long-term sustainability of all market participants.

In its recent rejection of a Cabinet appeal of the CRTC’s Review of Wireless Services, Canada has maintained consistency in its approach to telecom policy, balancing the often competing objectives of extending the reach of networks, delivering world-leading service quality, and affordable prices.

We read “the Governor in Council considers that the Commission’s decision appropriately balances investment incentives to build and upgrade networks, and sustainable competition and the availability of affordable mobile wireless prices for consumers”.

It hasn’t always been that way. Over the past ten years, I have referred to Canada’s telecom policy environment as being like “Calvinball” at least a dozen times. “The only permanent rule in Calvinball is that you can’t play it the same way twice.”

That is hardly the way to provide policy leadership for an economic segment at the core of the digital economy.

In a dissenting opinion a few years ago, former CRTC Commissioner Candace Molnar wrote “Citizens and regulated entities alike deserve a Commission that is fair, predictable, and transparent.”

In upholding the CRTC’s decision, the determination was consistent with an Order in Council from August 2020, which declared, “Canada’s Future Depends On Connectivity”.

At that time, Cabinet said:

On the basis of its review, the Governor in Council considers that the rates do not, in all instances, appropriately balance the policy objectives of the wholesale services framework and is concerned that these rates may undermine investment in high-quality networks, particularly in rural and remote areas. Retroactive payments to affected wholesale clients are appropriate in principle and can foster cooperation in regulatory proceedings. However, these payments, which reflect the rates, must be balanced so as not to stifle network investments. Incentives for ongoing investment, particularly to foster enhanced connectivity for those who are unserved or underserved, are a critical objective of the overall policies governing telecommunications, including these wholesale rates.

Recall that CRTC Chair Ian Scott’s welcome letter, the Ministers of Heritage and of Innovation, Science and Economic Development said “The Government’s objectives are to improve the quality, coverage, and price of services.” At the time, I wrote “It is a delicate balance. Quality and coverage require significant levels of capital investment, especially in a country like Canada.”

Consistency in policy and regulation is critical for the investment community. “Citizens and regulated entities alike deserve a Commission that is fair, predictable, and transparent.”

Canadian telecom policy appears to be clear. Canada’s future depends on connectivity.