LibertyVoice

Freedom and internet

Canadian Telco Ownership Rules From By-Gone Era

Corporate structures and loan agreements are rarely the stuff of public interest, yet, as my weekly technology column notes (Toronto Star version, homepage version) last month they attracted considerable attention in a case involving Globalive, a new wireless company vying to shake up Canada’s telecommunications industry.  Operating as Wind Mobile, the company paid hundreds of millions of dollars in 2008 to scoop up spectrum to enable it to operate as a new national wireless carrier.

Bell Canada, Telus Corp., and Rogers Communications, the big three incumbent carriers, unsurprisingly opposed the new rival.  First they lobbied against a set-aside of spectrum for new entrants. When that failed, they argued Globalive failed to comply with the Telecommunications Act's foreign control restrictions. Last month, the Canadian Radio-television and Telecommunications Commission agreed. While Industry Canada previously concluded the company met the Canadian control requirements for the purposes of the Radiocommunications Act when it bid for spectrum, the CRTC concluded that its ownership and control structure do not meet the legal requirements to operate as a wireless carrier.  

The commission identified a number of changes that will be needed to comply with the law and Globalive says it is evaluating its options. The first option is presumably for the federal cabinet to overrule the CRTC. Last week, Industry Minister Tony Clement gave Canada's telecom players until Wednesday to provide their views on the issue as he conducts a pre-cabinet review.  A decision may be weeks away, but the process puts a much bigger question into play: Will the Globalive case become the catalyst for the elimination of telecom foreign control restrictions?

This is hardly the first time the foreign control issue has been raised in Canada.  There have been earlier recommendations to scrap the requirements, most recently in the 2006 Telecom Policy Review Committee report, which concluded that Canada has "one of the most restrictive and inflexible set of rules limiting foreign investment in the telecommunications sector" among all OECD countries.

With hindsight, it should have been obvious that the foreign control issue would be the elephant in the room around the government's efforts to inject greater competition into the Canadian telecom sector.  There is little doubt that officials – not to mention Canadian consumers – were anxious to encourage new entrants.  While the set-aside in the spectrum auction guaranteed the new entrants, leaving the foreign control rules untouched meant the job was only half-done.

With the Globalive entry into the Canadian market at risk and hundreds of millions in spectrum in limbo, Canadians must ask hard questions about the merits of foreign control restrictions.  

The days of retaining Canadian control over physical telecommunications infrastructure connected to millions of homes are over. Wireless networks involve significant investments in cellphone towers, but not direct connectedness into individual homes.

Further, the notion that Canadian control guarantees Canadian jobs is also part of a by-gone era.  Canadian carriers regularly outsource some of their customer service jobs out of the country.  Meanwhile, other parts of the organization – retail and business sales as well as network building – involve jobs that will remain in Canada regardless of a company's country-of-origin.  While some head office jobs may be at risk, new companies operating in Canada could potentially create more jobs, not fewer.

It is tempting to blame the CRTC or the incumbent telecom providers for the current mess, but the real culprit lies with outdated legislation that prioritizes Canadian ownership over a competitive Canadian marketplace. The solution lies in changing the law to facilitate foreign ownership of common carriers – both to facilitate immediate competition and to pave the way for more foreign bidders in the next round of spectrum auctions.

CTV & Canwest Ask CRTC To Order Blocking Of U.S. Programs

The CRTC kicks off two weeks of hearings next week that place the spotlight on the fee-for-carriage fight. Last night, I participated in an interesting debate on the issue on TVO's The Agenda called A Pox On Both Their Houses: Cable and TV.  The program is embedded below.  One issue that was not raised – indeed it has not received any real public attention – was noted earlier today by Alan Sawyer.  He notes that CTV and Canwest have quietly asked the CRTC to order cable and satellite companies to establish a new policy of "program deletion."  The new policy (which is supported in a Toronto Star piece today) would mean that when a Canadian broadcaster buys the Canadian rights to a U.S. program, the U.S. broadcast would be blocked in Canada for a seven-day window. 

In other words, rather than the current simultaneous substitution policy, which allows for the programs to air at the same time and for the substitution of the Canadian broadcast on the U.S. channel (thereby leading to the annual complaints about Super Bowl commercials), the U.S. broadcast would be blocked altogether.  That would allow Canadian broadcasters to air the U.S. program whenever they like and block the U.S. version altogether.  In a world when consumers expect to view programs on their schedule, CTV and Canwest seek a return to a prior era when the broadcaster retains (now illusory) control over access to the broadcasts in Canada.

Sandvine Report Should Raise Doubt About Traffic Management Practices

Mark Goldberg points to a recent Sandvine broadband report on recent broadband traffic patterns. Goldberg points to the growth of real-time entertainment traffic, such as streaming, which is consistent with what the CRTC heard during the net neutrality hearings over the summer.  Most notable, however, is yet another confirmation that P2P traffic is declining as a percentage of overall traffic.  Sandvine reports that it dropped by 25 percent as a share of overall traffic.  Moreover, in a table on peak-time bandwidth share, Sandvine reports that web browsing leads (34.4%), followed by real-time entertainment (29.1%), and then P2P (16.9%).  Sandvine also reports that peak-time usage is narrowing.  In 2008, peak-time ran from 6:00 to 11:00 pm.  In 2009, Sandvine said it has narrowed to 7:00 to 10:00 pm.

This data is important in considering the test established by the CRTC for reasonable traffic management practices.  First, practices that target P2P will be increasingly difficult to justify (many argue application-specific approaches are never justifiable), given its declining share of traffic the application represents.  Second, far broader peak-time characterizations – Bell claims that its peak-time runs from 4:30 pm to 2:00 am – are unlikely to meet the CRTC's standard for any harm from traffic management practices being as little as reasonably possible.

Clement Conducts “Pre-Cabinet Review” of Globalive Decision

The Globe reports that Industry Minister Tony Clement has sent a letter to the telecom industry asking for comments by November 18th on the CRTC's Globalive decision. The request is described as a "pre-cabinet review" of the issue.

Wagman on the Fee-For-Carriage Fight

"What this is really about is a profound lack of imagination by all involved."

Consumer Choice Holds The Key To Solving Fee-For-Carriage Fight

Today is the deadline for submitting comments on the fee-for-carriage issue (you can do so directly at the CRTC's website) and I wade in with my views in this week's technology law column (Toronto Star version, homepage version).  I note that for the past two months, Canadians have been subjected to a non-stop marketing campaign pitting two deep-pocketed industries – broadcasters and broadcast distributors – against each other.  Television and radio commercials, full-page newspaper advertisements, websites and Twitter posts all seek to convince the public that new fees for local television signals are, depending on your perspective, either a TV tax or crucial funding to save local television.

Broadcasters claim some local TV stations will close if they do not receive millions in additional fees from cable and satellite companies as compensation for distributing their signal.  Cable and satellite companies leave little doubt they will pass along any new fees – possibly as much as $10 per month per subscriber – to their customers. The additional fees inevitably will not come from the bottom lines of cable and satellite companies, but rather from the pockets of consumers.

While the reaction for many Canadians might be sensibly to tune out the entire mess, politicians and regulators will still be left seeking a solution. In fact, some politicians have pledged to support local television, but also promised to avoid new consumer costs.  Can these two positions be reconciled?

Perhaps.

The answer may lie in giving consumers more choice, by allowing them to pay only for the channels they want – regardless of whether they are local, foreign, or specialty (such as CNN or movie networks).  

A full "a la carte" model would require three steps. First, exclude public broadcasters from the issue altogether. The CBC argues it is also entitled to fee-for-carriage compensation, yet that runs counter to the very notion of a public broadcaster.  The public has already paid for the broadcasts and should not be asked to pay again.  Public broadcasters should instead form a new basic tier for cable and satellite providers that would be considerably cheaper since it would only include channels for which no fees are attached.

Second, make all remaining channels – local, foreign, and specialty – optional for consumers.  Groups of channels can still be packaged to offer better value (sports, movie, local channel, or U.S. channel packages), but the crucial difference from the current system would be that Canadian consumers would get to decide what channels they want to pay for.

Third, institute a fee-for-carriage system so private broadcasters are compensated for their local signals where consumers choose to subscribe.  If Canadians are really concerned with their local television, they will subscribe and the broadcasters will be the beneficiaries. If the Canadian broadcasters are wrong, however, they lose both compensation and mandatory carriage.

Such a system should meet everyone's needs. Politicians succeed in getting local television stations fees for their signal without forcing consumers who don’t want the channels to pay for them.  Consumers gain much-needed control over their cable bills so that they are not forced to pay new fees for signals they don’t want.  Broadcasters get their long sought-after fee-for-carriage model.  

Moreover, this approach fosters incentives for broadcasters to invest in local news and original programming because strategies based on simply licensing popular U.S. content will become less effective as consumers anxious to view those programs subscribe to the U.S. channels rather than the Canadian simulcast.

Adopting a genuine choice model would undoubtedly represent a dramatic shift in Canadian broadcast policy that has long featured must-carry obligations for Canadian broadcasters.  Yet it is the broadcasters themselves that argue for a new paradigm.  A system that matches fee-for-carriage with consumer choice may best reflect the needs of a television universe scarcely imagined when the Broadcasting Act was first drafted.

Liberals Call for Better Internet and Wireless Competition, Net Neutrality

The Liberals have issued a noteworthy release calling for better competition and service for wireless and Internet services in Canada.  The party says there is a real competition problem that calls for "concrete proposals to lower prices and improve cell phone and Internet service for urban and rural Canadians." The specific recommendations include:

  • clear guidelines to facilitate tower-sharing and roaming agreements for new entrants
  • re-instating the cellphone cost calculator to provide greater transparency
  • adopt clear net neutrality principles and regulations.  The proposed neutrality principles include "all internet networks, including wireless networks, must treat all lawful content, applications and services in a non-discriminatory manner."  The policy also calls for full disclosure of network management practices
  • new regulations for wholesale Internet services and encourage investment in Internet infrastructure

The release demonstrates the increasing political attention to digital economy issues and mounting concern over Canada's lagging performance.  Given yesterday's CRTC decision involving Globalive, it would be useful for the party to state its position on foreign ownership restrictions for telecom providers as there is an urgent need to address the issue of injecting new competition into the Canadian marketplace.

The Globalive Decision: Time To Pick Competition Over Canadian Ownership

The CRTC this afternoon issued its decision on whether Globalive, a new wireless competitor about to operate as Wind Mobile, complies with the foreign ownership restrictions currently found in the Telecommunications Act.  While Industry Canada previously concluded that Globalive met the Canadian control requirements for the purposes of the Radiocommunications Act in its bidding for spectrum, the CRTC has concluded that its ownership and control structure do not meet the Telecommunications Act requirements.  The Commission has indicated a number of changes that will be needed to comply with the law.  Globalive says it evaluating its options.

It is tempting to blame the CRTC or the incumbent telecom providers (who filed the complaint over the Globalive structure) for this mess, but the real culprit lies with outdated legislation that prioritizes Canadian ownership over a competitive Canadian marketplace. It is the wrong choice.  Canadians are desperate for a more competitive wireless marketplace.  The issue now falls to Industry Minister Tony Clement, who needs to change the law to facilitate foreign ownership of common carriers – both to facilitate immediate competition and to pave the way for more foreign bidders in the next round of spectrum auctions.  The government rightly said it did not matter that a foreign company took control of a former Canadian tech star like Nortel.  It should similarly not matter who controls a telecommunications company, particularly in a marketplace starving for competition.  The government should amend the law to remove the foreign ownership restrictions now.

CRTC Sends Message: Traffic Management Rules Apply To Wireless Too

CRTC Chair Konrad von Finckenstein delivered the keynote address at the International Institute of Communications conference in Montreal yesterday.  The speech reviewed last week's traffic management/net neutrality decision.  On the issue of wireless, he stated:

At some point down the road, we will need to review the regulatory measures that apply to wireless service providers and their use of ITMPs. Until then, we expect ISPs offering mobile broadband services to respect our framework. 

During the Q&A, he was asked directly whether there would be a hearing for wireless traffic management issues.  He responded by reiterating that the CRTC expects carriers to follow the same guidelines for wireless.  If they do, no hearing.  If they don't, they can expect a hearing where the CRTC will endeavour to establish clear legal requirements that there are similar traffic management requirements.

CRTC Posts Updated Stats on Do-Not-Call

The CRTC has posted updated data on the experience with do-not-call.  It reports that as of September 30, 2009, there have been over 7.6 million registrations and 200,000 complaints.  The CRTC has 87 active investigations, issued 145 warning letters, 10 notices of violations, and imposed 7 administrative monetary penalties.

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