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This commentary appears on CARTT.ca

It is almost a defining characteristic for Canadians to distinguish ourselves from our neighbors to the south. The untrained ear may think we speak English somewhat similarly, but Canadians emphatically define ourselves as “not American” while we roll-up-the-rim-to-win.

That doesn’t keep us from wishing we had American prices for gasoline, milk, eggs, airfares, clothing and alcohol. It is springtime, and it is natural for us to look wistfully at greener grass growing on the other side of the border. We can add the USA’s unlimited mobile data plans to the list, prompted by one of the first acts by Federal Communications Commission (FCC) Chair Ajit Pai of dropping an investigation into zero rating practices by US carriers. The removal of that regulation resulted in every major carrier launching an offering of unlimited data plans.

Now, Chairman Pai has teed up the restoration of the free and open internet as he recently announced his plan to restore the light touch regulatory approach that helped make the Internet great.  Not a moment too soon. New research indicates that the misguided Title II regulation in the United States and the general pro-regulatory black cloud that has hung over the FCC in recent years, has deterred some $30-40 billion of internet investment annually in the US.

Canada’s current regulatory environment is reminiscent of the Obama administration’s FCC in which the Orwellian euphemisms of “openness” and “choice” characterized greater government control. Currently, there is an official telecom policy direction requiring the Canadian Radio-television and Telecommunications Commission (CRTC) to “rely on market forces to the maximum extent feasible” and “when relying on regulation, use measures that are efficient and proportionate to their purpose and that interfere with the operation of competitive market forces to the minimum extent necessary.”  Still, a growing number of CRTC regulations (including price controls on internet access and regulating the internet) have served to reduce differentiation between service providers, such as with mobile video services, such as NFL Mobile and Bell Mobility.

The CRTC claims that its increasingly heavy hand “relies on market forces to the maximum extent feasible, seeks to remove barriers to entry, and is a measure that is efficient and proportionate to its purpose.” But it is unclear that the CRTC’s policy would survive an independent audit of compliance to certify whether its direction is consistent with market-based policy. I have written before about the cost of regulation in Canada [here and here] and have often asked, how will we measure success? We don’t know. The CRTC offers no measurement.

As one long-time observer of the Canadian regulatory scene recently asked, should we expect capital to migrate to Canada because of our improved rules? If we look at the rate of startups in Canada versus the rate in the US, should we expect that rate improve in Canada relative to US? I think not. Investment is pouring into the US as a result of a return to its pro-competition and pro-consumer approach. In spite of the net neutrality policies meant to improve innovation in Canada, Canadian entrepreneurs continue to flock the US.

In general, the world is siding with the US, not Canada, on this issue. Courts in Netherlands, Sweden, and Slovenia have struck down heavy handed net neutrality regulation and price controls that restrict zero-rating and free data policies. With any luck, the bold and much-needed moves from the FCC in the US will provide the needed example to the CRTC in Canada and help us restore internet freedom again.

Internet Freedom is certain to be among the topics discussed at The 2017 Canadian Telecom Summit on June 5-7 in Toronto.

Join in the discussion.

Have you registered yet?

It is almost a defining characteristic for Canadians to distinguish ourselves from our neighbours to the south. The untrained ear may think we speak English somewhat similarly, but Canadians emphatically define ourselves as “not American” while we roll-up-the-rim-to-win.

That doesn’t keep us from wishing we had American-style prices for gasoline, milk, eggs, airfares, clothing and alcohol. It is springtime, and it is natural for us to look wistfully at greener grass growing on the other side of the border. And we can add to the list, unlimited mobile data plans.

So the City Council for Toronto recently passed a motion calling for the CRTC to mandate “reasonably priced unlimited data packages” as an option:

City Council direct the City Manager to convey to the Commissioner of the Canadian Radio-television Telecommunications Commission the request that major telecommunications providers across Canada be required, as part of their licensing arrangements, to provide consumers with options for reasonably priced unlimited data packages that would be part of the cellular packages they offer.

This motion was passed just a few weeks after that same city council was unable to balance its own budget without increasing taxes and adding additional user fees. Leaving aside the issue of CRTC “licensing arrangements” (and retail pricing forbearance), we might consider whether increased regulation is the best way to increase price competition.

I have frequently written about looking at greener grass elsewhere. We seem to lose sight of how many of these outcomes emerge. US unlimited data plans were not introduced due to regulation, but rather in response to signals of loosening regulation from the new FCC chair, Ajit Pai.

I have written before about the cost of regulation in Canada [such as here and here]. Is it really reasonable for Toronto’s City Council to think we can regulate our way to “reasonably priced unlimited data packages”?

A recent paper by Roslyn Layton and Joseph Kane describes how Denmark “has pursued a largely laissez-faire approach to telecom regulation.”

Denmark has been praised as a broadband utopia, but observers often fail to understand the concrete decisions that helped create Danish telecommunications policy.

There is an official telecom policy direction requiring the CRTC to “rely on market forces to the maximum extent feasible” and “when relying on regulation, use measures that are efficient and proportionate to their purpose and that interfere with the operation of competitive market forces to the minimum extent necessary.”

Still, a growing number of CRTC regulations (including regulating the internet) have served to reduce differentiation between service providers, such as with mobile video services (such as NFL Mobile).

Has increased regulation limited choice and reduced incentives for pricing as a competitive response? Is there another approach that could lead to improved outcomes – greener grass?

There are a couple panels at The 2017 Canadian Telecom Summit [June 5-7, Toronto] that could examine this issue, among many, many more. The latest version of the brochure was updated today. Have you registered yet?

I thought that so many people were pointing at the US as a model for Canadian wireless. So many have looked south of the border, longing for Cingular-type plans and services or Apple’s iPhone to be launched here.

But the apparently, the US wireless market is primitive, and doomed to stay that way, according to an editorial in the NY Times. [Thanks, Michael for the tip.]

An open auction means that anyone can purchase spectrum and use it in a way that allows them to determine how to best get a return on their investment. Adding rules amounts to constraining the flexibility for companies risking billions of dollars on a business plan, thereby increasing risk. Increased risk translates into an increased cost of capital.

As I wrote before, there are questions that could arise with terminology as imprecise as “open access“. It seems to me that FCC Commissioner Robert McDowell‘s July 24 “Broadband Baloney” Opinion piece in the Wall Street Journal has some appropriate messages for wireless markets as well.

In the next few years, we will witness a tremendous explosion of entrepreneurial brilliance in the broadband market, if the government doesn’t micromanage. Belief in entrepreneurs and a light regulatory touch is the right broadband policy for America.

With wireless services, the grass always seems greener elsewhere.

As a new government is formed in Canada, there will be an opportunity for a renewed focus on developing a cohesive digital strategy to guide the economic recovery.

Yesterday’s election results are not yet finalized, but we already know that there will be new faces in Cabinet in a number of portfolios impacting communications and connectivity.

A couple weeks ago, I wrote about the need “for a clear strategy, recognizing the balance and inter-relationships between competing objectives for universal access to high quality telecommunications services at affordable prices” (see: “How did we get here? How do we move forward?”).

A recent article on Politico by Vodafone Group CEO Nick Read, “How the EU can speed up its digital transition”, caught my eye. In it, he speaks optimistically of the need for changes in telecom policy and regulations, as some countries recognize that there are opportunities to learn from approaches being applied in other jurisdictions.

European policymakers profess to the importance of the digital transition. As evidenced during the pandemic, modern connectivity and digital services play a critical role in our economic recovery and to help future-proof our society. Yet, Europe is falling behind other pioneering nations in everything from high capacity networks, 5G industrial applications, IoT and cloud to artificial intelligence. A large and growing investment gap has emerged, not least in digital infrastructure and 5G.

The Vodafone CEO mentioned a few examples from a variety of countries, such as recent reforms in Germany that are expected to reduce the time to deploy mobile base stations by up to 4 months.

To attract private investment, Spain introduced interesting policy reforms, such as in the structure of its July auction for 700MHz spectrum, that concluded after just 2 days. Vodafone, Telefónica and Orange all secured frequencies. Read noted that “the government did not use the auction to artificially meddle with the market structure or extract value from the industry.” The spectrum licenses are for 40 years, double the normal length, as long as the carriers meet their licence obligations. “Long-term spectrum licences at reasonable prices will help us move forward with the deployment of 5G services that will revolutionise industry, public services and healthcare.”

Most striking in the Politico article is the call for government and the private sector to develop a new collaborative approach. The digital transition is seen as being an important foundation for a greener economy. “As evidenced during the pandemic, modern connectivity and digital services play a critical role in our economic recovery and to help future-proof our society.”

Whether it is the NDP’s “Ready for Better”, the Conservative’s “Canada’s Recovery Plan”, or the Liberal’s “Forward. For Everyone”, I remain optimistic that the new government will bring a fresh opportunity to leverage the capabilities of Canada’s communications sector, to build Canada’s digitally powered future.

There is much work to be done, but it’s a new day dawning.

The issue of communications industry cross subsidies has come to the fore with the Government’s introduction of Bill C-10, “An Act to amend the Broadcasting Act and to make consequential amendments to other Acts”, legislation that authorizes Canada’s communications regulator, the CRTC, to impose a wide range of regulations and fees on internet content.

Canada has come a long way from its original approach to internet content, as set out in May 1999. At the time, in “Regulation of the Internet in Canada”, I wrote “The CRTC has become one of the world’s first regulators to clearly enunciate a “hands off” policy toward the Internet – allowing market forces to drive development of content and increase levels of accessibility for users.”

A few years ago, I wrote “Regulating the internet: what happened?”, observing “The past 5 years have seen Canada apply an increasingly heavy regulatory hand. A search for “Regulating internet” on my blog turns up a number of posts expressing concern about government intervention.” Citing an earlier post, I noted: “Will Canadians see greener Internet pastures in the USA?”, observing Orwellian euphemisms of “openness” and “choice” to characterize greater government control. Canada’s current approach to internet regulation contrasts diametrically with our neighbours to the south.”

Much of the focus on Bill C-10 has been on the proposal to impose fees on global internet technology companies in order to contribute to Canadian content development.

In some ways, this is reminiscent of a discussion in “The future of communications cross-subsidies” from 6 years ago. The government has long used the communications sector as an alternate tax and wealth redistribution system, with fees from urban phone subscribers subsidizing rural, business subsidizing residential, broadcasting subsidizing content production. In a monopoly era, there was little harm and great political benefit. Social objectives could be attained without impact on the government budget. Politicians could take credit for achieving goals with others footing the bill. Inflated communications bills could be blamed on the industry.

But with competition, especially internet-based competition, an increasing amount of revenue leaks out of the cross-subsidy system. For a given level of subsidy, an ever increasing percentage of revenues was required for those portions that remained in the system, accentuating the cost advantages for industry participants operating outside of the “system”.

In such circumstances, it seems to me there are two ways to level the playing field: try to capture more players inside the cross-subsidy system; or, move responsibility for funding government objectives to the general tax base. In choosing the former, Bill C-10 continues along the path of increasing regulation of the internet.

The United States has followed a different path. As Canada’s neighbours to the south prepare to transition to a new administration, it is again worth examining what FCC Chair Ajit Pai told The 2017 Canadian Telecom Summit:

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.

Should Canada approach internet regulation with a greater sense of humility?

Do such policies sufficiently consider whether they are imposing or relaxing barriers to innovation and investment?