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Over the past few weeks, I have been concerned about a growing number of calls for broadband to be considered a public utility. We all want to find ways to get more people to have access to broadband. Treating broadband as a public utility just isn’t the right way to get there.

In conversation with host Matt Galloway on the May 26 edition of CBC Radio’s “The Current”, Laura Tribe of Open Media said:

Matt Galloway: And so now is the time you say, to talk about this as an essential service. People have suggested that the Internet could be a public utility. What would that mean?

Laura Tribe: So the CRTC in 2016 ruled that is a basic service. That it is something of a part of our communications packages that everyone should have access to. As an essential service, it really means the government is obligated to ensure connectivity. The same way that you are guaranteed electricity or water, you would be guaranteed that there’s Internet available to you.

In reality, the CRTC didn’t rule that the internet is a basic service, as I described as “Error 1” in my blog post from a month ago, “Words matter. Accuracy matters”. No matter how many times Open Media mis-characterizes the CRTC’s broadband policy, TRP CRTC 2016-496, it won’t change.

But, let’s focus on the main subject: “Should broadband be a public utility?”

Later on that same CBC radio program, Maryam Monsef, Canada’s Minister for Women and Gender Equality and Rural Economic Development, appeared:

Matt Galloway: So do you support the idea of the Internet being a public utility?

Maryam Monsef: I believe it’s an essential service and I’m open to the idea and one of the things that my officials and I are working on is adding and tweaking what we were ready to roll out before COVID. And this is among the many good ideas that we are considering. What are the pros? What are the cons?

Happily, Minister Monsef asked for the pros and cons.

So it was especially timely to read last Thursday’s post by University of Florida’s Mark Jamison, Director of the Public Utilities Research Center. As his biography indicates, he provides international training and research on business and government policy, focusing primarily on utilities and network industries, including directing the PURC / World Bank International Training Program on Utility Regulation and Strategy.

In “Is broadband now a public utility?”, he writes: “I thought the days of telecommunications being considered a public utility were far behind us. Then came the pandemic! Suddenly broadband seems as important as electricity. And some people believe that hands-on, utility style regulation will do a better job than competition for delivering needed broadband to everyone. I don’t know whether to think of this as Back to the Future or Deja Vu.”

His post continues with an hour-long conversation with Dr. Scott Wallsten, President and Senior Fellow at the Technology Policy Institute. Dr. Wallsten was the economics director for the FCC’s National Broadband Plan, and he served as an economist for The World Bank.

A few weeks ago, Dr. Wallsten wrote “Is Broadband a Public Utility? Let’s Hope Not”. In that post, Dr. Wallsten writes, “Some argue that the importance of broadband and the gaps in usage prove we should consider broadband a public utility like electricity, water, and gas, and regulated as such.”

Sounds somewhat apropos for our current conversation, right?

Dr. Wallsten writes:

Calling broadband a public utility seems like a nifty way of solving last-mile access problems. But experience with actual public utilities should give anybody pause before advocating that approach. Electricity prices have increased more than broadband prices, innovation in electricity has been slower, and productivity growth lower. To top it off, electricity was not brought to the country faster than broadband has been.

Since Minister Monsef wants to understand “the cons” associated with broadband as a public utility, she and her team needs to consider the points made in this video. The conversation warns of the consequences of public utility regulation and also, of government ownership.

We should be wary of calls for utility-style regulation of the internet and deeply concerned about suggestions that governments (at any level) can build, operate, maintain and invest in capacity and upgrades more effectively than the private sector.

I have written many times before that the history of Government PTTs – Posts, Telephone and Telegraph – is not a proud one.

The conversation between Drs. Wallsten and Jamison is worth your time to watch; it is a must-see by officials working on Canada’s broadband policy and regulation.

As Dr. Wallsten concluded, “We need solutions to filling gaps in broadband coverage. Treating broadband the way we treat public utilities is not one of them.”

At some point, we’re going to emerge from isolation and begin the normalization process for our lives and livelihoods.

When will that be?

When can that be? What kinds of key indicators will let us know that it is safe to relax certain restrictions?

What kinds of principles should guide us in understanding how to manage risks of viral transmissions? How (and when) do we begin to have government and industry collaborate to develop workplace standards and protocols to mitigate transmission risks?

Last Friday, the Crisis Working Group of the C.D. Howe Institute released an important report, “Canada Needs “Playbook” For Restarting Economy” [pdf, 167KB]. The Institute’s Working Group on Business Continuity and Trade (co-chaired by former Ontario Minister of Finance Dwight Duncan, and GE Canada VP Government Affairs and Policy Jeanette Patell) “discussed the need for a “playbook” to restart Canada’s economy, the implementation of supports for businesses to “bridge” the present shutdown, and the importance of continued investment in robust telecommunications infrastructure to meet the current surge in demand.”

While the focus of the discussion was an examination of the general economy, nearly a quarter of the report is dedicated to the telecommunications sector, recognizing “the important enabling role of Canada’s resilient telecommunications services during this crisis.”

The working group acknowledged the challenges facing telecommunications providers to maintain network reliability amid record usage levels when “every day is Superbowl Sunday.” Looking ahead, the roll-out of next generation networks will be essential for helping Canadians to adjust in a “new normal” (e.g., sustained “work from home”) for Canada’s economy post-crisis.
…
Members particularly emphasized that Canada’s telecommunications services have sustained economic activity as many Canadians switch to working by remote connection at home. The resilience of telecommunications networks today is a result of past investments and current efforts in the field to maintain infrastructure. Network providers are also rapidly building new facilities where these are needed – for example, to service remote learning for students and temporary medical facilities.

The report contains suggestions for measures governments could undertake to encourage further network resilience post-crisis, by providing incentives to accelerating capital investment by service providers. Referencing an report from a month ago [discussed in my blog post: “Could political interference create ‘sovereign risk’ for Canada’s digital infrastructure?”], the working group observed “government policies directed at reducing prices for telecommunications services (such as low rates for mandated access by resellers to telecommunications facilities) may discourage future investment.”

Looking ahead, the roll-out of next generation networks will likely be necessary in a “new normal” for Canada’s economy post-crisis. “Work from home” is likely to be sustained until the COVID-19 virus is fully contained. Fast and reliable telecommunications services will be essential for helping Canadians to adjust.

Recall, the group had previously stated, “If government pursues short-run political objectives at the expense of returns on long-lived infrastructure investments, certain Council members believe confidence in Canada’s regulatory regime for telecommunications will be difficult to win back.”

As a recent Intelligence Memo observed, “Recent experience demonstrates that, whatever discontents the federal government may be channeling, the quality and coverage of Canada’s networks, the cost of services, and the variety of platforms and carriers available, is impressive. Our telecommunications infrastructure is a vital asset. Good public policy should strengthen it.”

Prime Minister Trudeau published the mandate letters for each of the members of the new Cabinet.

Of particular interest to the telecommunications community is the mandate letter for Navdeep Bains, Canada’s Minister of Innovation, Science and Industry.

The letter includes a telecom specific section:

• Use all available instruments, including the advancement of the 2019 Telecom Policy Directive, to reduce the average cost of cellular phone bills in Canada by 25 per cent. You will work with telecom companies and expand mobile virtual network operators (MVNO) in the market. If within two years this price target is not achieved, you can expand MVNO qualifying rules and the Canadian Radio-television and Telecommunications Commission mandate on affordable pricing.
• Award spectrum access based on commitments towards consumer choice, affordability and broad access. You will also reserve space for new entrants.

Some concerns came to mind on my first read of the letter, as I wrote on my Twitter stream. While the preamble in the letter says “We are committed to evidence-based decision-making…”, one might have difficulty squaring this promise with what appears to be a pre-determination of issues being explored by the CRTC in Public Notice 2019-57: Review of Mobile Services.

Some additional points set out in Minister Bains’ mandate require coordination with other members of Cabinet:

• With the support of the Minister of Middle Class Prosperity and Associate Minister of Finance and the Minister of Seniors, create a new Canadian Consumer Advocate to ensure a single point of contact for people who need help with federally regulated banking, telecom or transportation-related complaints. Ensure that complaints are reviewed and, if founded, that appropriate remedies and penalties can be imposed.
• Work with the Minister of Infrastructure and Communities, the Minister for Women and Gender Equality and Rural Economic Development and the Minister of Canadian Heritage to deliver high-speed internet to 100 per cent of Canadian homes and businesses by 2030.
• Co-lead work with the Minister of Canadian Heritage to modernize the Broadcasting Act and the Telecommunications Act, examining how best to support Canadian content in English and French and ensure quality affordable internet, mobile and media access.
• Work with the Minister of Canadian Heritage to introduce legislation by the end of 2020 that will take appropriate measures to ensure that all content providers, including internet giants, offer meaningful levels of Canadian content in their catalogues, contribute to the creation of Canadian content in both Official Languages, promote this content and make it easily accessible on their platforms. The legislation should also consider additional cultural and linguistic communities.

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• Work with the Minister of Justice and Attorney General of Canada and the Minister of Canadian Heritage to advance Canada’s Digital Charter and enhanced powers for the Privacy Commissioner, in order to establish a new set of online rights, including: data portability; the ability to withdraw, remove and erase basic personal data from a platform; the knowledge of how personal data is being used, including with a national advertising registry and the ability to withdraw consent for the sharing or sale of data; the ability to review and challenge the amount of personal data that a company or government has collected; proactive data security requirements; the ability to be informed when personal data is breached with appropriate compensation; and the ability to be free from online discrimination including bias and harassment.
• With the support of the Minister of Canadian Heritage, create new regulations for large digital companies to better protect people’s personal data and encourage greater competition in the digital marketplace. A newly created Data Commissioner will oversee those regulations.

Like last time, the mandate letter talks about broadband coverage, without addressing factors impacting adoption.

Over the coming months, we’ll be certain to be coming back to these issues.

The following opinion piece by CWTA President & CEO Robert Ghiz appeared in Hill Times on December 3:

During the recent federal election campaign, we heard a lot of talk about cellphone prices. Now that the election is over, it is important to put rhetoric aside and look at the facts. Not just about prices, but also about the future of mobile communications and what is required to connect more Canadians and to reap the economic and societal benefits of the new 5G technologies.

The price of wireless data has actually been declining significantly over the last several years. In fact, the CRTC recently reported that wireless prices declined by an average of almost 30 per cent from 2016 to 2018. That was before unlimited data plans were launched across the country. Today, Canadians can get unlimited data plans that start from $50 to $75 a month, a huge decline in price from 2018 when, according to the government’s own study, $75 was the average price for a 2-GB plan.

Declining prices are only one indication of successful wireless policy. Network performance and coverage are also fundamental components of a healthy wireless industry. Given its size, low population density, and climate, as well as government licence fees that are among the highest in the world, Canada is one of the most challenging countries in which to build wireless networks. Yet despite these challenges, Canada’s wireless providers have, so far, invested over $70-billion in building world-class wireless networks throughout the country, according to data gathered by the Canadian Wireless Telecommunications Association, the CRTC, and Nordicity. That’s about twice as much on a per connection basis as in the European Union, according to the industry group GSMA Intelligence.

Thanks to these massive investments, Canada’s LTE wireless networks are ranked the third fastest in the world (and twice as fast as the U.S.) and reach 99 per cent of Canadians. This success is not limited to urban areas. A recent report by OpenSignal shows that network coverage and performance in Canada’s rural areas is also among the best in the world. In fact, if rural Canada were its own country, its average download speeds would rank higher than the average speeds across all of the United States and more than 70 other countries.

These achievements were possible because successive federal governments adopted policies that fostered meaningful competition while also maintaining an environment that encourages investment in wireless infrastructure. These facilities-focused policies also encouraged the introduction of new regional wireless providers, such as Freedom Mobile, Videotron, Eastlink, and Xplore Mobile that are playing an important role in providing sustainable competition, while at the same time making significant investments in Canada’s wireless infrastructure.

Policy proposals that would instead favour companies looking to be “virtual” wireless providers, or mobile virtual network operators—whose business models depend on regulatory arbitrage rather than investing their own capital to build and maintain wireless infrastructure—have been repeatedly rejected by the CRTC. Why? Because any potential benefits are outweighed by the negative impacts on sustainable competition and investment.

MVNOs will not help extend wireless networks to rural communities or invest in 5G infrastructure, and any material impact on prices is unlikely. The fact is Canada’s wireless market is already delivering the same or lower prices than high-profile U.S. MVNOs like Tracfone and Google Fi, at speeds faster even than early 5G implementations in the U.S.

In its submission to the current CRTC proceeding, the Competition Bureau and its expert consultant concluded that a broad-based MVNO policy would not have a significant impact on prices, would harm the regional providers who have brought meaningful competition to the market, and would reduce network operators’ incentive to invest in network infrastructure. In short, “the risks associated with such a policy are too high for it to be warranted.” The bureau recommended the CRTC maintain its facilities focus as “[a]ll else equal, facilities-based competition is the most sustainable and effective form of competition.”

Canada can’t afford to ignore the success that policies supporting facilities-based competition continues to have in delivering performance, coverage, and declining prices. Countries that have turned their backs on facilities-based competition have seen the quality of their wireless networks and services suffer, investment decline, and jobs disappear. We must not let this happen in Canada. The government should focus on policies that encourage investment in Canada’s future and deliver increasing value to Canadians and our economy.

A big week ahead for telecom regulatory departments.

The revised schedule for the CRTC’s review of mobile wireless services (TNC 2019-57) are due on November 22, with the oral hearing phase scheduled to begin February 18, 2020. Final submissions in that regulatory proceeding are currently scheduled for March 23, 2020.

A week and a half ago, I wrote about the net new subscriber additions in the past quarter. A few days later, in a November 11 research report, Scotiabank argues that the recent quarter’s financial results released by Canadian mobile carriers are indicators that there isn’t a need for regulators to mandate the establishment of mobile virtual network operators (MVNOs).

According to the Scotiabank Converging Networks research note “the most important part of the proceeding revolves around the question: will the CRTC mandate Mobile Virtual Network Operators (MVNO) access?” Scotiabank believes the decision will be among the most important regulatory rulings since the new-entrant AWS-1 spectrum set-aside in 2008.

According to Scotiabank, the facilities-based competition that emerged from the 2008 decision, giving rise to mobile operators Quebecor (Videotron), Shaw (Freedom Mobile) and Eastlink, “looks sustainable.”

Quebecor has been a wireless facilities-based competitor in Quebec for a decade. Is that not sustainable enough? We estimate the company has now captured approximately 19% market share in the province, and, with its new Fizz brand, the momentum has actually accelerated. We estimate Freedom’s market share of covered population (POP) at just under 10%, and we see share gains continuing, driven by network quality improvement, and supported by network and spectrum investment.

Scotiabank’s research found that Shaw and Quebecor’s combined share of new subscribers has reached approximately 30%.

Wireless key performance indicators show that competition has been rising with a long runway. In particular, all three incumbents’ ARPUs are now in decline and postpaid churn is rising. We believe these trends have been indirectly driven by competition from Shaw and Quebecor. As we noted above, we do not foresee either slowing down until they have achieved their market share objectives, which we believe is in the 20%-30% range of covered POP. At their current market share (of POP covered) and our estimate of the pace of share gains, we believe Quebecor still has another five years before it reaches 25% share and Shaw has 10 years of market share gains ahead before it reaches 20% share.

According to the Scotiabank report, the “real sustainable competition” is expected to encourage Bell, TELUS and Rogers to push forward with investment in 5G as a differentiator. Conversely, Scotiabank warns that “heavy-handed regulation such as regulated MVNOs may drive prices down temporarily, it will likely deter the move to 5G” because of an increased uncertainty of returns on future investment and a higher cost of capital.

We believe the United States offers a good example. Competition driven by T-Mobile and Sprint Corp. has driven Verizon Communications Inc. (VZ-N) to accelerate 5G investments, and, in the case of AT&T Inc. (T-N), to invest in media. While both Verizon and AT&T pursued different strategies, their objectives were similar in that they both pursued investments in areas where they thought would help differentiate against T-Mobile. This was all driven by challengers making network investments to compete against Verizon and AT&T, particularly in the case of T-Mobile.

Scotiabank’s recognizes that regulators face a “delicate act of balancing competition and investment incentives. A wrong move could have years of unintended consequences.” The report discusses a number of these potential unintended consequences:

• Large companies with global scale that are not current telecom service providers could become MVNOs under mandated MVNO regulations.
• Large global companies entering the MVNO market selling wireless services as loss leaders would commoditize and cause a significant decline in prices in the short term, causing investments in next generation network investments to decline in the medium to long term and causing network quality to ultimately suffer
• Smaller facilities-based wireless operators like Freedom, Vidéotron and Eastlink (the same companies that have created the competition over the past decade) are more likely to be affected by MVNOs than the incumbents

But Scotiabank warns “Even if the regulators knew of these consequences, trying to establish further regulations to prevent them may just add further complexity with less regulatory certainty.” For more coverage of the Scotiabank report, see the write-up by Greg O’Brien in Cartt.ca: “Wireless results show mandated MVNO is the wrong way to go, says report“.

A few weeks ago, I discussed important data arising from Statistics Canada’s release of the Internet Use Survey. That study included important information about adoption rates of connectivity and for those who don’t have a smartphone, asking why. In the current CRTC proceeding, will affordability concerns be backed by data?

Submissions are due at the end of this week. Scotiabank believes the filing by the Competition Bureau will carry significant weight. The CRTC’s schedule set January 13, 2020 for parties to reply.