June 17, 2014 2 years 8 months ago

CANADIAN TELECOM SUMMIT 2014: Incumbents, independents, do battle during regulatory panel - and try to answer the privacy question

TORONTO – Wholesale wireless service continues to be a prickly topic between wireless incumbents and new entrants, and quickly became a dominant theme Tuesday morning during the Canadian Telecom Summit’s annual regulatory blockbuster panel, moderated again this year by Cartt.ca editor and publisher Greg O’Brien.

Bell, Rogers and Telus remained steadfast in their collective belief that increased regulation on wholesale wireless services will result in decreased network investments.  Ken Engelhart, SVP regulatory for Rogers Communications, got that ball rolling early in the 90 minute panel, raising the matter in his opening “trite observations”.

“Wholesale regulation inevitably leads to a reduction in investment, because when you have wholesale regulation, the people who build the networks have to give some of their money to their mandated wholesale partners and that means that they have less incentive to invest”, he told the packed room, to the nodding heads of his compatriots at Bell and Telus.

Jonathan Daniels, VP regulatory law at Bell Canada, looked to Europe as an example of how “intrusive regulation” can weigh down the wireless and wireline market.  Striking the right balance, he said, must be based on both price and quality.

“I maintain that the most important measure is actually usage”, he said.  “Usage (in Canada) suggests that we’re probably getting the balance between quality and price right.  Canada is a world leader, it may not be number one in every usage category, but it tends to be up there in almost all usage categories.  We should be kind of proud of our networks in Canada.  And that’s been achieved because we’re in an investment climate.”

But Chris Tacit of Tacit Law, which represents “the competitive sector” like independent ISPs and CNOC, said that small players need a guarantee of wholesale access in order to both compete and to continue to innovate in ways that incumbents do not, citing VoIP and customer support in minority language and via social media channels as examples of such innovation.

“The problem is that in an industry such as telecommunications, the facilities that the incumbents own are under their sole control”, he said.  “So to get that competition, that’s the best way to organize business affairs and to remove those barriers to competition, as opposed to protecting individual competitors.  To create incentives for competition, access is necessary otherwise that competition will die stillborn.”

Wind Mobile’s chief regulatory officer, Simon Lockie, pumped his company’s first quarter influx of 30,000 new subscribers, noting that Wind’s “very healthy share” of valuable post-paid additions came at the expense of incumbents Bell, Rogers, and Telus. 

“We were saddled from the outset with enormously punitive domestic roaming rates." Simon Lockie, Wind

“It’s important to note that we’ve achieved that success despite some significant circumstances that hampered that success, and one of the most significant is domestic roaming”, he said.  “We were saddled from the outset with enormously punitive domestic roaming rates, and I think that the government, to their credit, has recognized that however good their intentions were, in having domestic roaming being mandated under the conditions of license, the mechanism didn’t work and so that has had a very serious effect on us.”

He added that the pending cap on domestic roaming will be “much appreciated interim relief” but acknowledged that it is not a long term solution.

Both Rogers’ Engelhart and Ted Woodhead, SVP federal government & regulatory affairs at Telus, were critical of the “ladder of investment” approach to encourage infrastructure competition because it doesn't seem to them like any independent ISPs are actually ascending that ladder.

“The problem with that theory is that it has never proven correct.” - Ted Woodhead, Telus

“The underlying theories of most people who support massive unbundling or use of other people’s networks is that there is some investment ladder that the erstwhile competitor will climb and ultimately graduate to be a facilities-based carrier," Woodhead said.  “The problem with that theory is that it has never proven correct.”

“They want protected margins and that’s really sadly a kind of a universal theme in regulation - people say ‘I’m going to climb the ladder of investment, let me do this’ and then pretty soon they end up saying to the regulators ‘listen I don’t want to build anything, I just want to use the other guys network for cheap’”, Engelhart added.  “What wholesale competition really amounts to is the resellers are saying to the CRTC or to the government ‘have Rogers send a dollar to us; we’ll take that dollar and we’ll give 30 cents of it to consumers and we’ll keep 70 cents of it for ourselves and that’s competition’.  It’s not really competition, it’s a regulated arbitrage… and what you quickly lose out on in a system like that is anyone actually innovating and actually investing.”

Engelhart also addressed Lockie’s comments on domestic roaming, referencing the 2008 AWS spectrum auction rules that stipulated five year in-territory roaming for new entrants.

“What wholesale competition really amounts to is the resellers are saying to the CRTC or to the government ‘have Rogers send a dollar to us; we’ll take that dollar and we’ll give 30 cents of it to consumers and we’ll keep 70 cents of it for ourselves and that’s competition’.  It’s not really competition, it’s a regulated arbitrage… and what you quickly lose out on in a system like that is anyone actually innovating and actually investing.” - Ken Engelhart, Rogers

“Wind bought those licenses knowing that it wouldn’t be able to – instead of building the network out, they just abruptly stopped building after they had done the big cities and they said ‘we have no intention of ever building a network, we want Rogers to build a nice network and then we want to use that network for cheap’."

“We’ve never said anything, with all respect Ken, about not wanting to spend money and not wanting to build out a network”, Lockie rejoined.  “We’ve spent a fortune on building out a network and we continue to.  It is no secret that, based in part on spectrum availability and in part on that we spent the first year and a half on fighting a regulatory battle triggered by these guys on our ownership and control, that financing has been hard to come by.  We have no interest in roaming long term and we’ve never indicated that’s the kind of business strategy that we have.  We do want credible wholesale rates so that our users have an unfettered ability to use their phones, even if they’re not on our home network, and that is what you need to build up a business case to get investors to give you the money that you then deploy on building out your network, and that’s what we’re doing.”

Telus is so over Mobilicity

After some prompting by moderator O’Brien, Telus did publicly confirm that it has walked away from its bid for struggling new entrant Mobilicity, as prior reports elsewhere had indicated.

“In terms of consumers and investors, not just Canadian but also international capital markets and investors, people require certainty in their operations and for investing purposes”, Woodhead said.  “If you’re an investor in Mobilicity or any of the new entrants... at the same time as wanting entry, you want to have the ability to exit if things didn’t go as planned. So where we find ourselves today is that I think that there’s still a great deal of uncertainty.

“Telus did withdraw its offer for Mobilicity, so it remains in creditor protection, their employees are affected obviously by that, and who knows what will come out of that proceeding, but I don’t think that there’s a lot of certainty for anyone there, and I think that’s unfortunate.  I guess that I would leave it at that.” 

And what about those telecom Transparency Reports?

A question from the audience, posed by Dr. Chris Parsons, the project director of the Telecom Transparency Project at Citizen Lab, may have surprised some of the panelists.  After praising Rogers’ and TekSavvy Solutions initial Transparency Reports, made public earlier this month, Parsons questioned the telcos' data retention and sharing policies, especially in light of a recent Supreme Court decision that upheld Internet users' privacy.

“We will comply with the law”, said Bell’s Daniels.  “As to the Transparency Report, our view is that we would really like some guidance on all of this.  We’d like some guidance from government agencies coming together to tell the industry exactly the kind of report that they want, what should be disclosed what shouldn’t be disclosed.   We would like to comply and do this in a manner that’s consistent with all of our obligations.”

“We have mocked up a report and we too are interested in getting some guidance”, added Woodhead, revealing that Telus has looked to Verizon and Vodafone’s templates.  “…So we’ve said that we’ll come out with one later in the summer and you’ll see it.  I suspect that this will set... a kind of domino effect where various providers will do it.  We’re all here to comply with the law and we will do so.”

“In terms of reporting, I think our side of the industry is, generally speaking, interested in being transparent, it’s one of the things that we value." - Chris Tacit, Tacit Law

Tacit suggested that a one-size-fits-all approach to a Transparency Report may not work for his clients, some of whom have less than five employees.

“There are not a disproportionate amount of these requests to begin with”, he said.  “In terms of reporting, I think our side of the industry is, generally speaking, interested in being transparent, it’s one of the things that we value, but I would caution that scale matters here...  It’s not realistic to make (a small ISP) create a privacy report like Rogers or TekSavvy did, to that level of detail or maybe even at all.  I think that there has to be some sort of threshold of dealing with this in a way that doesn’t administratively cause a huge burden for smaller players.”