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Canada’s telecom situation reaches boiling point

02 Feb

I don’t know about you, but I’ve been positively blown away by the level of anger – and therefore media coverage – over this whole usage-based internet billing schmoz we’ve been having here in Canada. The activists over at StopTheMeter.ca had, as of this writing (Tuesday afternoon), a quarter of a million signatures on their petition. That’s enough to motivate the two major opposition parties into condemning usage-based billing, but also enough to spur action from the government.

Both Prime Minister Stephen Harper and Industry Minister Tony Clement came out swinging against our major internet service providers and regulator yesterday, indicating they will soon reverse the CRTC’s ruling, possibly even today.

A number of folks have wondered why all this outrage is happening now – after all, the CRTC approved UBB last year, with only the formalities of pricing happening last week. The overwhelming majority of Canadians – I’ve seen estimates as high as 96% – get their service from big ISPs such as Bell and Rogers, who have had small and ever-shrinking caps for years. The CRTC’s ruling really only affects the small guys, who are now shrinking their caps to come into line with the big boys. So why all the anger if very few people are going to be affected?

I’d posit it’s because after years of building, the anger against our telecom companies has finally hit the boiling point. It’s also because we finally have a real, legal and legitimate service – Netflix, namely – that crystallizes the problem for the average Canadian. In-the-know techies have been aware of our crappy internet situation for years, but it’s largely been invisible to the mainstream because they haven’t had a good example of the issue.

To Netflix’s credit, the company has excellent brand recognition in Canada, so when the average person realizes they’re going to have to pay three times to use the service – once for internet access, twice for Netflix access and thrice for bandwidth – they start to realize there’s a problem. They start to figure out that their tiny monthly usage isn’t going to cut it with the internet of the future.

What we have here in Canada, finally, is a mainstream awakening to the real power of the internet. It’s not just about getting email and surfing the web as the ISPs would like people to believe, it’s about delivering new services in new ways. That includes bandwidth-intensive services such as Netflix.

I’d like to pause here for a second and take a blatant swipe at the people who wonder why we need bigger caps – the “Ooh, look at me, I only use two gigabytes a month” crowd – and/or people who have criticized heavy downloaders as “bandwidth hogs.” A few years ago, there was really only one way for the average Joe to be a “hog,” or someone who chewed through hundreds of gigabytes a month, and that was through heavy peer-to-peer file sharing, generally of the illegal type. This sort of file-sharing of movies and TV shows sprung up because people wanted digital delivery of such content and they didn’t want to pay an arm and a leg for it. And guess what? That early consumer demand means we now have legitimate services arriving to deliver exactly this sort of thing. Yesterday’s Napster is today’s iTunes and yesterday’s BitTorrent is today’s Netflix. Thus, there’s another term for “bandwidth hog,” and it’s “early adopter.” So before you condemn the hogs, stop and ponder the fact that one day, you’ll be one too.

But back to the government. Exactly what will it do with UBB? Well, it can and likely will reverse or negate the CRTC’s decision somehow, which ultimately will do very little good. Like I said – 4% of internet subscribers will be pleased, and perhaps that 4% will grow slightly thanks to the exposure companies such as Teksavvy have gotten from this whole affair. But so what? The situation is still crappy. What about the bigger picture?

Can the government force big ISPs to give customers bigger usage limits? Yeah, and I can shoot lasers from my eyes and teleport short distances by folding through a shadow dimension inhabited by leprechauns.

The UBB mess is actually a great opportunity for the government to lift foreign ownership restrictions. With the public’s hate-on for Bell, Rogers et al at an unprecedented level, there’s never been a better time to sell people on the possibility of those companies getting wiped from the map. Think about it: if you hate Bell or Rogers, how sad would you be to see them bought by AT&T or Comcast? I suspect many people would cheer such a notion.

The other, less-drastic and probably more palatable option the government is mulling is a gradual reduction in foreign ownership restrictions. Rather than throwing the gates wide open, foreign acquisitions would be limited to smaller players for the first few years, then opened wide to cover all Canadian companies. It’s a very sensible choice and my odds-on favourite. Given that the Liberals and NDP have committed themselves to the fact that something must be done on UBB and telecom in general, this is a great opportunity. The sell to the public is also an easy one: here come foreign companies to compete with Bell et al.

I’ve actually been thinking about what the telecom landscape would look like should this happen and was in the process of writing up my predictions before all of this happened. I’ll post them tomorrow.

In the meantime, there’s another pesky big-picture issue that needs to be dealt with: the CRTC. Most people are under the false assumption that the regulator is supposed to protect the interests of the Canadian public. Uh uh. The CRTC believes its main job is to enforce the Telecommunications Act to the letter of the law. Even though those two things are supposed to go together, any judge or lawyer can tell you the two philosophies often clash because the law is open to interpretation.

Consequently, the government is increasingly having to step in and clean up the CRTC’s mess. If it reverses the UBB decision, that’ll be two major episodes in just over a year. The first, of course, was the CRTC refusing to let Wind Mobile start up in 2009 because the company didn’t meet those Canadian ownership requirements. The government, not so much a stickler for the letter of the law and more concerned with making the public happy, overturned the decision. Now, hundreds of thousands of wireless customers are telling our big wireless carriers to shove it and taking up service with better priced new entrants, including Wind.

Some people have argued for the complete destruction of the CRTC, but that’s probably a bad idea – things would inevitably be even worse if there were no one overseeing things. But there is clearly a problem. The regulator is repeatedly accused of being too cozy with the telecom companies it referees, a criticism stemming from the fact that some commissioners used to work for those same firms. The counter-argument is, firstly, that the CRTC is merely carrying out the “hands-off” orders it received from the government in 2006, and secondly that it needs telecom expertise on staff to intelligently carry out its mandate.

All of those arguments have merit, but if the government is going to move against UBB and the crappy internet situation in any meaningful way, it needs to initiate a review of the CRTC. The government needs to examine how the regulator is structured, what its mandate is and how it is carried out, not to mention its own policy direction.

If Ottawa isn’t willing to lift foreign ownership rules, it needs to put ideology aside and think long and hard on whether a light-handed regulatory approach is wise. Otherwise, there are going to be plenty more CRTC decisions to overturn.

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9 Comments

Posted by on February 2, 2011 in crtc, government, internet, telecommunications

 

9 responses to “Canada’s telecom situation reaches boiling point

  1. Eric

    February 2, 2011 at 9:36 am

    AT&T or Comcast buying Bell/Rogers is the last thing I’d want. That would just make them bigger and bolder than they are now. The Americans aren’t much better off than we are – worse in some areas of telecom, so I have no faith that they’d be any better.

    If they came in on their own or via a major investment in an existing independent company, competing head-to-head with Bell/Rogers I think we’d be better off in the short term, but in the long term I think the only way to make sure our Internet stays neutral and fairly priced is to follow down the Australian trail and either nationalize the last-mile infrastructure or keep it regulated at “cost plus markup” for wide-open third party access.

     
    • Vespuccian

      February 2, 2011 at 11:54 am

      I’m no expert, but what little info I’ve gathered on the matter says that the ‘last-mile’ has been effectively nationalized since 1995. The CRTC (the one everyone wants to kill right now) ruled that the incumbent ISPs (Bell, Rogers, etc) must allow the smaller companies and wholesalers access to the network to deliver thier service at a fair wholesale price.

      The UBB issue looks like double-dipping by selling the service wholesale to other ISPs, then charging the ISPs for the people using that service at retail price.

       
      • Rui

        February 2, 2011 at 3:29 pm

        the last mile hasn’t be nationalized… if it was then all ISP’s would have equal access and not this mess. And Bell has been blocking indies from accessing the CO’s for their equipment by using measures through the CRTC.

         
  2. Lord Lansdowne

    February 2, 2011 at 10:54 am

    The real issue here isn’t even the UBB, but the last mile that Bell and Rogers control. UBB isn’t even Bell’s first attempt. Remember throttling our connections during “peak time”? Or how non-Bell customers have been moved from their original COs? My DSL speed with TekSavvy has dropped from 5mbps to 2.6mbps. Nothing TekSavvy can do and DSLREports.com shows that many other third-party ISP customers experienced the same. UBB is just the same dirty old tactic. Solving UBB doesn’t solve the real issue: get Bell/Rogers away from the last mile. Then they might actually look into innovating rather than finding ways to give us less for more dollars.

     
  3. Mark Evans

    February 2, 2011 at 2:49 pm

    Pete,

    Great insight and perspective on the telecom landscape and the role that the CRTC is playing. The one thing missing – and something I focused in a blog post today – is how there needs to be more competition. I’m puzzled why the PCs were so gung-ho on wireless while broadband competition has been ignored. Suddenly, everyone has woken up to the fact the Internet has gone mainstream, and there an oligopoly firmly entrenched that now will squeeze consumers more than ever.

    Mark

     
  4. bwalzer

    February 2, 2011 at 4:37 pm

    Have AT&T buy Bell? I guess that might be ironic or something. Sort of a cross border undoing of the original AT&T breakup in the states.

    We would in effect be giving an American company famous for abusing their monopoly ownership of the bulk of last mile infrastructure in Ontario. I think that would go as well as could be expected…

     
    • petenowak2000

      February 2, 2011 at 6:36 pm

      Your comment on Sweden a couple weeks ago actually inspired tomorrow’s blog post. I’m going to try and envision what Canada would look like if those ownership restrictions were lifted. I think the key is to first get quantity of competition, which in many cases results in better quality.

       
    • Hub

      February 2, 2011 at 11:20 pm

      Given that the current AT&T is actually one of the baby bells, SBC, that rebranded itself AT&T when it got the opportunity to buy the brand, that would be totally irony.

      It should be noted that the Bell breakup in the us led to regional monopolies as well.

       
 
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