The Canadian Telecom Summit (CTS) is an annual industry conference focusing on the telecommunication, IT, and broadcasting industries. The conference brings together senior executives, along with policy makers, regulators, and industry analysts to discuss key issues and trends that will impact this critical sector of the Canadian economy. While government officials from various areas (including the CRTC, Industry Canada, Heritage, and the Prime Minister’s Office) often attend, they are not active presenters or panelists. Thus, the CTS serves as part of the regular, routine contacts between government and business that can influence policy decisions, along with facilitating communication between infrastructure manufacturers, business service providers, and carriers and internet service providers (ISPs).
For a researcher focused on spectrum policy, it was interesting to observe that very little of this year’s Canadian Telecom Summit put much emphasis on spectrum. It existed on the periphery but largely just as one of many factors that networks require to meet the growing bandwidth demands of mobile broadband. MTS’s CEO noted that the 700 MHz auction rules favoured national carriers at the expense of regional carriers in context of the Harper government’s 4th carrier policy. WIND Mobile’s CEO also talked about the need to get access to spectrum to roll out LTE but, once again, in the competition lens of a 4th national carrier.
The CTS is primarily an industry conference, so focused on current dynamics in the commercial/consumer sector. The 700 MHz auction wrapped up earlier this year (February) and the 2500 MHz auction is still 10 months away. The July 7th AWS-3 announcement by Industry Canada to hold another auction in-between appears to have genuinely caught industry watchers and participants by surprise. Even rumours of such a possibility were nowhere to be heard at CTS. So, understandably, spectrum availability was not of high priority — or at least debate/discussion — at the summit.
At the always lively ‘Regulatory Blockbuster’ panel, most of the debate took place around wholesale domestic roaming and network access issues — areas that the CRTC is currently considering. Whether panelists were incumbents (Rogers, Bell, TELUS), new entrants (WIND), or representing independent ISPs (Tacit), largely dictated their positions and speaking points. Failure of new entrants and startups to move up the investment ladder in facilities-based competition was highlighted by the incumbents. Speaking points for non-incumbents included regulated access for cablecos on incumbent local exchange carrier (ILEC) networks during their startup phase, Canada’s increasing underperformance in broadband speeds and price/value, and use of domestic roaming rates as an anti-competitive tactic.
From a policy analysis lens, this presents a few serious challenges. Power asymmetries between incumbents and challengers are emphasized when issues are dealt with on an individual basis and comprehensive sectoral policy is not reviewed. The more specificity is employed — the narrower the policy issue — the more it allows more powerful actors to make ‘reasonable’ arguments and extract more concessions. It also can result in satisficing by policy makers, meeting the minimum requirements for achieving a particular result without fully exploring/pursuing more optimal options.
On the issue of wholesale network access, Jonathan Daniels (VP, Regulatory Law, Bell) argued that unlike DSL internet-access, there was no legacy benefit to fibre to the home/node (FTTH/FTTN). Which is ‘reasonable’, since incumbents are deploying the FTTH connection for new customers only when requested for existing residences and businesses. But it also ignores incumbent right-of-way access and switching station facilities that are part of legacy copper line deployments.
Right-of-way access in this case refers to the ability of utility companies (ISPs, WSPs, telcos, and cablecos) to run network wires under and above ground on public and private land and have guaranteed access, necessary to build and maintain telecommunications infrastructure. Telecom companies that were originally telephone (or cable) companies often built their original networks as a monopoly, and have maintained right-of-way access sometimes for more than 100 years. To limit the amount of tearing up of roads and properties, governments will often mandate incumbents provide access to these ‘local loop’ or ‘last-mile’ connections/infrastructure.
Ted Woodhead (SVP, Federal Government & Regulatory Affairs, TELUS) argued that Industry Canada’s ‘changing of the rules’ around the transfer of AWS spectrum set-aside had negative consequences for investment. (Simon Lockie, Chief Regulatory Officer, WIND Mobile, suggested this was more a case of government clarifying, rather than changing, rules.) This may be true but this ‘changing of the rules’ impacts foreign investors more and, in fact, likely improves incumbents’ access to domestic capital markets.
Industry Canada’s Digital Canada 150 strategy — a document named for Canada’s age, not anywhere near the policy’s broadband speed targets — continues this satisficing policy making. Canada’s government policy is too narrowly focused on individual issues and not truly a roadmap to achieving the Telecommunication Act’s policy objectives in an ambitious and/or strategic manner.
In this regard, the ‘spectrum crunch’ argument made in the run up to the 700MHz auction appears to be even more a tactic by incumbent carriers to disaggregate telecommunication policy in order to maximize their asymmetric position in the sector — especially with the high-value, low-band spectrum available in that auction. Such behaviour by incumbents is both rational and justified to protect their corporate interests. And it is not solely directed towards new entrants. WIND’s Lockie noted in his CTS presentation several examples of inter-modal incumbent regulatory competition:
- Cost-based rates for access to support structures (poles, strands, ducts), duplication of which can be unsightly or disruptive for communities [cable company initiative opposed by ILECs];
- ILEC demands for fair access to Multiple Dwelling Units leading to the “MDU Condition” to promote choice for end-users [LECs v. cable co’s];
- Vertical Integration rules governing access to content held by integrated operators [content rich BDU’s v. content poor BDU’s].
Source: WIND Mobile. Regulatory Blockbuster Panel [Slide Deck]. 2014 Canadian Telecom Summit.
Rogers’ Ken Engelhart (SVP, Regulatory, Rogers Communications) argued the regulatory system should be about consumers and that government should remove barriers to competition but should not help individual competitors. The crux of his position was, “Incentives matter. Countries with high levels of wholesale regulation invest less and have second-class networks.” (Source: Rogers Communications, Regulatory Blockbuster Panel [Slide Deck]. 2014 Canadian Telecom Summit.)
The problem is that government should not be focused solely on investment levels, as this only tells part of the story. While Rogers, TELUS, and Bell all used examples of Europe vis-à-vis North America, data was selectively used and given with no context. Less investment could be the result of less duplication of infrastructure. “Second-class networks” is a euphemism for lack of LTE but this is more the result of greater challenges coordinating spectrum policy across individual countries, and a hangover the financial Euro crisis. Germany, one of the first EU countries to allot spectrum for LTE and with a strong economy, has comparable mobile download speeds and broad LTE network coverage.
It is up to government and regulators to be more holistic in policy development and weigh the benefits and costs to consumers and citizens more broadly.