Sunday, December 6, 2009

Is Cabinet about to get knee deep in the big muddy? "L'Affaire Globalive" is a sticky affair indeed.

This is the week Ottawa insiders are predicting that the Priorities and Planning Committee of Cabinet is expected to meet to discuss "L'Affair Globalive" and possibly overturn what is viewed as a fair and legal decision of the CRTC, all without either an actual appeal before it or any public process to justify such a review.

While the newspapers have covered parts of this ongoing saga, this is the kind of story that makes you wish for the days when media budgets were still large enough to do deep investigative journalism. Maybe I am too close to this mess but I think it's a great story. Consider the elements .

  • A public policy decision to add more entry in the wireless sector leads to an auction of public airwaves with the rules so distorted that it is estimated that all bidders ultimately paid 40% more for spectrum relative to similar values in the US.
  • While everyone was forced to pay more due to poor auction design, incumbents were forced to pay an extra 40% premium relative to new entrants for next generation wireless.
  • The auction distortions caused by government fiddling with auction design were so out of whack it is estimated that overpayments exceeded $2 billion. That's $2 billion now lost to support future industry investment or $2 billion that Canada's wireless industry now has to make up by reduced investment, or for some, higher costs of capital.
  • It then turned out that one of the most active bidders in the auction, Globalive, a company subsequently found by the CRTC to be controlled by Orascom an Egyptian wireless carrier and multinational, was ineligble to operate as a Canadian carrier (and according to the rules set by Industry Canada therefore ineligble to hold a licence).

What starts to turn this into such a good story is that Globalive actually got a licence from Industry Canada even though Industry Canada's own rules clearly prohibited foreign control of Canadian undertakings and even though it had one single shareholder, Orascom, controlling over 80% of Globalive's capital structure as well as controlling much of the Board structure and operational decisions .What is so remarkable is that the structure granted a licence by Industry Canada earlier this year was even more Orascom controlled than the structure the CRTC ultimately had no choice but to turn down in October.

Interestingly most people commenting on the issue of rule of law, including many who wanted Globalive to succeed, agree the CRTC had no choice but to find the Globalive structure violated the law. Moreover there is a very serious issue of precedent with respect to foreign ownership if this decision is overturned.

  • This begs the question as to how Industry Canada officials missed the call on this and why?
  • It begs a further question as to why this decision is being reviewed in Cabinet, even though there is no formal appeal of the decision before it?
  • Even stranger is the question as to why Orascom head Nagib Sawiris was heard at the Morgan Stanley investor conference in Barcelona to say the decision would be overturned and yet again repeat his comments November 16 at a press Conference in Cairo? All this before the Minister had even received comments he had requested from parties as part of his review.

Some answers are maybe not so hard to figure out.

  • Industry Canada did not expect it's auction was going to spiral out of control and the total of $4.3 billions that went into the Treasury was not something anyone at Finance or elsewhere were going to sniff at during a recession. That made it easy to claim victory and ignore the fallout for bidders that need to pay up on a $2 billion overpayment.
  • This was Globalive's problem. As one of the high bidders in the auction, Globalive faced an upfront bill for over $400 million as a consequence of bad auction planning and the fact that additional private equity had dried up as a result of the recession. Globalive now faced the same overvaluation problem numerous companies across the global economies faced and Cairo needed to keeps its piece protected .
  • My guess is Industry Canada decided to see this huge foreign capital outlay as something temporary in order to keep one of the largest new entrants in play. However there is no law that allows for temporary foreign ownership and as the CRTC found, no evidence to justify the level of control Orascom exercised under the law. Thus the hole kept getting dug deeper.

So why the rush to judgement and why the comments from Barcelona and from Cairo. Again not so hard to figure out.

  • Government policy has made of a big deal about promoting more competition in wireless and the CRTC which is already in its bad books was seen to have undermined that policy. Sheer nonsense, given new entry will be heavy with other "eligble Canadian alternatives" who played by the rules. But equally guaranteed that some people in power are pissed off with the Commission.
  • Industry Canada officials granted a licence to an ineligble company and now face the classic bureaucratic conundrum. If you identify that as a mistake, someone higher up will look for a sacrificial lamb. Ergo why we suspect the Department will recommend overturning the CRTC in the face of overwhelming evidence and fact in law to the contrary.
  • And no one likes to be sued. Its hard to believe that the statements from Barcelona and Cairo was not a pretty simple message. "You granted us a licence and we invested hundreds of millions of dollars in Canada .Fix it or face legal action". The issue is did someone tell Orascom not to worry?

In my view these scenarios explain a lot but there are still lots of questions unanswered. like:

  • Why is the government convinced that truly eligble bidder companies that constructed their legal affairs according to explicit rules of law and as directed by Industry Canada won't see the Cabinet overturning the CRTC as equally worthy of jusicial response?
  • And as a question of ethics, what is it that Cairo brings to the table that gets it a special pass and unfair advantage, based on the CRTC findings, when Canadian companies like Dave, Public Mobile, Eastlink, Quebecor and other bidders did not?
  • No matter what the bureaucracy may say to keep the lid on precedents, why would Cabinet support whatever convoluted legal analysis will be required to pretend that overturning the CRTC ruling will not gut our foreign ownership restrictions? Unless of course in a minority environment you might want to loosen the ownership rules.
  • But if you really want to loosen the foreign ownership rules why favor Orascom over Verizon, AT&T, T-Mobile or Orange. What is unique about the Orascom investors that requires the government to bend the rules on their behalf?
  • Orascom is owed no favors from government .They knew the rules and played a different game.Their bad.

Lot's of good questions to answer . Maybe if Cabinet overturns the CRTC this week or next those questions are finally going to get asked, as Canadian media begins to look closely at how Canada's first foreign controlled carrier under "the new rules" got a head start on the rest of the field . And why?

Wednesday, November 18, 2009

TELUS cover letter to Minister Clement re Globalive

November 18, 2009
The Honourable Tony Clement
Minister of Industry
C.D. Howe Building
235 Queen Street
Ottawa, ON K1A 0H5

Dear Minister,

Subject: TELUS’ Further Comments In Respect of Globalive – Telecom Notice of Consultation 2009-429

In reply to your correspondence dated November 6, 2009, please find attached TELUS’ further comments in respect of Globalive’s non-compliance with the Canadian ownership and control requirements. There are many compelling reasons why you should not intervene as you are being urged to do by Globalive and Orascom. These reasons are fully discussed in TELUS’ submission, but include the following:
•There is no reason that would justify intervention by the Governor in Council in a legal finding of fact, by an independent tribunal, in an open and public process

•To intervene, as Orascom is urging, would render meaningless Canada’s ownership and control regime governing the Canadian wireless, telecom, cable and broadcasting industries

•Allowing foreign interests to control our telecommunications and broadcasting sectors through the back door is not in the public interest and would create major uncertainty and confusion for all communications companies currently complying with the law

•There is no way to intervene that would not trigger most favoured nation provisions of the North American Free Trade Agreement and the General Agreement on Trade in Services

•Bidders including all new entrants, were put on notice as to the rules for eligibility and bid over $4 billion in the AWS auction and, as you have been advised by other new entrants, it would be patently unfair to now change the rules of the game after the fact

•It is a matter of public record that the CRTC offered to hold its review process at the same time as that of Industry Canada, but Globalive refused that offer. The effect of that refusal lies clearly with Globalive and Orascom

•The CRTC had no choice under the law to find Globalive in non-compliance given 82% of the capital of Globalive is owned by Orascom, in addition to other levers of control unearthed by the CRTC

•Globalive and Orascom were provided a roadmap by the CRTC to comply, but have chosen instead to ask the Governor in Council to exempt them from the laws that govern all other competitors to advantage itself

•Regardless of the choice Globalive makes, the Government’s objective of more competition has been achieved with the licensing of compliant Canadian competitors like Public Mobile, Shaw, Eastlink, Videotron and Dave Wireless

•Globalive is the master of its own destiny and can enter as soon as it meets the same threshold as other new entrants have done.

I trust that these comments are of assistance to you in your review of this matter.
Yours truly,
Michael Hennessy
Senior Vice President
Regulatory & Government Affairs

Friday, November 13, 2009

Local TV and the battle to control Jurassic Park

It's hard to meet anyone on the street that does not suggest that the debate on local TV has gone over-the-top. It's getting hard to disagree, even as a participant in the CRTC debate. When you think of it in terms of time and energy spent as well as resources wasted, this debate is missing the point. Big time.

This has become much like a battle of dinosaurs to see who controls Jurassic Park. The big question now is who cares? Some people very much, but I think most Canadians are ready to hit the off button.

Here is a radical thought. The whole issue about local TV is a red herring and a waste of our time. I grew up in an era when local TV was, well, really local. Local TV was not defined by the news hours but by hours of homegrown local programs, hosted by local personalities.

Most local TV has not been local for ages. Local TV died when big broadcasting consolidated and created national networks. Rational economics drove those decisions at the time but its a little late to pretend to save it now.

That said, local content is alive and well in papers, magazines, radio, community TV and the Internet. On those platforms we are incredibly well served and well connected.

The local TV fight between distributors, yes TELUS is a distributor, and big broadcasters has become a sideshow. Forget this debate for a minute and test the waters.

We should be talking about how all our media systems can be engaged to benefit creators and consumers. About how we can invest in ever improved digital platforms to connect creators and consumers. About how we can leverage the internet to create new market opportunities.

After all the content value chain starts at creation and ends at consumption. It does not work unless those elements are engaged.

So how do we engage? Engagement means developing consensus about building a national digital strategy rather than errecting a protected enclosure to preserve dinosaurs.

A key element of a digital media strategy is resolving creator rights disputes for new media so creators are incented to dedicate resources to new platform development.

Its about digital training so that our creative resources can exploit new technologies.

It means putting more content on-demand so it’s available to consumers anywhere, anytime and on any platform.

And it’s about giving consumers more opportunities to select the channels they want to watch and drop what they don’t value. That's a tough economic debate given the financial realities of the Canadian market but it does not help to ignore the issue. Discretionary consumption is what defines our markets today.

We think value for service should be defined by consumers not regulators.
And everyone should wake up from this noisy debate and start thinking “Internet “ before the next ice age.

I remember local TV and believe me local TV ain't local anymore. But local content is all around us.

Sunday, November 8, 2009

Why should Cabinet gut the law to fix a problem of Orascom/Globalive's own making?

November 2009 should go down as a sea change month for wireless and broadband competition in Canada. It sure has been an awesome start to the month for our team at TELUS.

Two new national networks (ours is better of course) that erase the competitive advantage Rogers has had on GSM. New international roaming agreements across 200 countries, competitive supply of iPhones, Android phones and a range of other devices. Massive extension of the new networks deep into rural and remote areas that were previously unserved in terms of broadband coverage.

On November 5th, TELUS launched a network that is clearly top tier in the world. It’s a network that allows Canada to leapfrog to the top of the heap when it comes to broadband wireless infrastructure. Infrastructure that is available on a competitive basis. That's not debatable anymore. Network equipment vendor Huawei in a full page ad last week, described it as "one of the fastest and most advanced cell phone networks on the planet."
How big? Try 1.1 million square kilometers big. That's 4X the size of Rogers 3G network. And its way ahead of the 3G networks in the USA. How did we get there? Competition and a billion dollars of private investment made this happen in the middle of the biggest recession in a generation.

Now that should be cause for celebration for everyone who was concerned that there was not enough competition in the market, or that Canadian broadband infrastructure has been lagging our trading partners, or that subsidies are needed to close the broadband gap. No matter your point of view on that, clearly all those items on that wish list just got checked off. Again as a result of private investment and the need to respond to existing competition.

But in Ottawa, the big noise around broadband and wireless is not the fact we have brand new leading edge networks but rather on the impact of the CRTC's decision that found Globalive, a prospective new wireless entrant, non-compliant with Canada's foreign ownership laws because Orascom a global carrier with 15 times the number of subscribers TELUS has, controls 82 percent of Globalive’s capital structure. This (the CRTC decision) is not really surprising, given that the evidence presented by Globalive itself, in an open and transparent hearing, proved beyond any reasonable doubt that Globalive was way offside. Not a little offside but miles off side. Yet somehow this seems to be everyone's fault but Globalive's.

So ignoring evidence that, with or without Globalive, there will be 4 to 6 competitors operating in most urban markets in 2010 and from 2 to 4 in most rural and remote areas, rhetoric has reached epic heights about a failure of Government policy unless Cabinet turns a blind eye to Globalive's obvious non-compliance. Never let the facts get in the way of a good story! In some quarters, Cabinet is being called upon to overturn a legal decision of the CRTC, even though that would fundamentally undermine the law and gut the ownership rules that apply to every telecom and wireless carrier, broadcaster and cable company now operating in Canada. All to ensure an ineligible foreign carrier, Orascom, can enter the Canadian market with a capital structure not permitted for every other company in Canada. Let’s call it the Globalive “special”.
There is a lot of noise about the loss of a competitive market if Orascom is not allowed to play by its own set of rules. In fact, the front-page story in the National Post on November 5 was not about the launch of new advanced networks that have already brought an end to Rogers GSM monopoly, but about the fall out from Orascom's now obviously ineligible participation in the AWS auction. An auction process that Financial Post editor, Terry Corcoran referred to as a "as a distorted shambles in which prices were grossly exaggerated by Mr. Sawiris' (Orascom's) authorized participation." Authorized but ineligible as it turns out.

The AWS auction has been a sore point with TELUS. NERA estimated those "grossly exaggerated prices" cost the industry over $2 billion in overpayments because of flawed design and cost TELUS an extra $400 million from inflated prices, including from a bidder that had no right, it now seems, to have been in the auction in the first place. To realize we were forced to pay that penalty because, in part, a key bidder was ineligible to participate is a bitter pill to swallow.

How much is $400 million. It’s almost twice as much as the Government of Canada is prepared to allocate to broadband stimulus/expansion for fiber and wireless. $400 million we can't spend to expand fiber in our own IPTV network expansion to compete with cable in the the TV business.

There should be no sympathy for Orascom. It placed a bet it could get into the market with a plan that was offside. It can't claim the CRTC process was a surprise. All bidders knew that the CRTC requirements were part of the compliance regime. It made a risky decision and lost. It can hardly be surprised irrespective of the PR noise it is now pushing out.
Face it, it would be pretty hard to imagine that any Canadian lawyer or bank, faced with a plan where 82 percent of the capital structure was foreign controlled, wouldn't have advised that the Orascom/Globalive game plan was a very high risk proposition. Orascom rolled the dice. In fact most critics of the CRTC decision actually agree the CRTC had no choice under the law but to reach the conclusion it did reach.

But now the CRTC is being painted as a villain for upholding the law, and Cabinet is being asked to essentially ignore the law in order to help Orascom enter a market in a way other foreign carriers are prevented from. I bet Cabinet won't get sucked in. The law is the law. And right now it's a law that every wireless and telecom carrier, cable company and broadcaster is forced to abide by.

Moreover, if Cabinet were to overturn the CRTC and allow Globalive to operate with control of 82% of its capital structure held by one foreign carrier, it would automatically trigger MFN clauses in NAFTA and violate other commitments made by Canada under the GATS. The CRTC would be forced to allow companies like Viacom or Disney similar rights in broadcasting because the criteria it rejected would now guide all future proceedings.
Effectively to make Orascom Canadian, Cabinet would have to gut all laws regarding foreign ownership in the communications sector, turning every carrier’s business strategy on its head. That's not about to happen. Orascom's problems are of it's own making and these are problems it could fix without standing the rule of law on it's head. It's not going to happen because it does not need to happen to ensure competition.

Clearly competition is operating with all engines firing. First, lets go back to the GSM monopoly Rogers has. It’s dead and buried as a result of competitive investment that had to be made irrespective of the auction. Open access? Can you say Android? Network supply? Start with the TELUS and Bell builds that cover around 90 percent of the population on HSPA and HSPA plus and that's global superiority that is top tier. Add Rogers HSPA and HSPA plus network across Canada and coverage with the fastest and most innovative networks on a competitive supply basis is a fait accompli. That's three national networks all on the latest HSPA technologies.

Now add Videotron in Quebec and you have even more competitors there. MTS Allstream and SaskTel already dominate in terms of market share in Manitoba and Saskatchewan so add even more competition there as well. (p.s. how did the auction policy ever decide that the dominant carriers in these two provinces were new entrants?)

Assume Shaw and Eastlink will move in the west and Atlantic Canada. Both have spectrum and Shaw just launched a $600 million debt offering. Remember too that under the auction rules cable companies get preferential treatment as new entrants. Under the policy cable companies get government help to compete. I am not making this up. It’d be nice if TELUS got the same deal in TV but those are the auction rules.

But what about real "new entrants" you might ask? Well the other new entrants are not going to be hurt if Orascom refuses to abide by the rules and goes home. In fact they become the big winners. According to a recent report by The Convergence Consulting Group, if Globalive does not enter then new entrants like Dave and Public Mobile probably add another 900,000 subscribers.

So even without Globalive we can expect at least 3 incumbent national carriers, new cable entrants in addition to Rogers across most regional markets and new national players like Dave and Public Mobile. That suggests 4 to 6 competitors in every major market in Canada and from 2 to 4 in rural areas. All without any need to gut our laws to fix Orascom's obviously offside business case.

This month while countries like Australia are pouring billions into broadband subsidies, private investment may have just closed 40% of Canada's broadband gap and is extending wireless broadband on a competitive basis to over 90 percent of Canadians. All with private money and all compliant with Canadian laws. That's a remarkable achievement. So here's the big question for Ottawa before it takes a step that is as irrevocable as it is unnecessary. Does anyone really believe Orascom/Globalive would ever had gone deep into our rural areas or is it just another urban play? Testifying before a Senate Committee, a Globalive executive tried to deflect the question by saying that service in those areas is very challenging economically. Really? Putting aside that astonishing statement of the obvious, if there are going to be 4 to 6 competitors in every urban market, is it worth breaking the rules for Orascom in a way that changes the game for scores of Canadian companies that have abided by the law?

This is a matter of law not policy and if policy dictates a change in the law that's up to Parliament to enact.

Thursday, September 17, 2009

Taxpayer subsidies for broadband and other big lies

Recently the campaign to save the Internet(didn't know it was in trouble)has ramped up into high gear in terms of rhetoric. According to critics of recent shifts towards a more commercially-based wholesale regime in Canada, "monopoly" telephone companies like TELUS and Bell are trying to kill competition by preventing access to networks built at the expense of the taxpayer. Now to anyone with any sense of regulatory history this is bull. No wait, bull is to small a concept to describe for such blatant and deceptive sophistry. Moose pooh, or MP for short is a better description for sure. Moose pooh is like bull but bigger and more substantial.

A little history here. Bell has always been a shareholder-owned and operated company. TELUS is a combination of AGT,BC Tel, Quebec Tel and Clearnet (with a dollop of Ed Tel thrown in). BC Tel and Clearnet were shareholder owned. While AGT was publically owned a generation back, it was privatized in 1990 well before the creation of the world wide web or the launch of DSL service . MTS Allstream a promoter of the taxpayer MP story, was also once the child of public enterprises (the state-owned Manitoba Telephone system and CN Rail part of the CNCP consortia that morphed into Unitel,ATT Canada and Allstream). However no one today is suggesting that MTS is a taxpayer funded entity.

In point of fact the investment that now supports the Internet for all the major local exchange carriers (outside of Saskatchewan) has been built on the regulated backs of shareholders first under rate of return regulation and subsequently price caps. Cable Internet was built with much less regulation .It is simply beyond myth to suggest, as some do, that taxpayers subsidized investment under ROR. Rather under ROR shareholders of telephone companies were provided a opportunity to earn a reasonable return on investment. The quid pro quo was that prices were kept artificially low to ensure universally affordable local phone service. The local telephone company was never the recipient of subsidy ,rather the local phone customer was heavily subsidized by the phone company in order to achieve universality objectives.

Rate of return was replaced by price caps in the late 1990s, but even before that the CRTC had imposed a split rate base regime in 1995 that moved most competitive investment, including DSL investment out of the regulated rate base. Price caps subsequently insulated subscribers even further from the risk of new investment to shareholders. Even so all that initial DSL investment has been and will remain subject to access tariffs, regardless of what happens around next-generation networks.

The other myth, is the myth of monopoly and the inability of other carriers to invest. First cable not telephone companies are the market share leaders in Internet access based on billions of dollars of infrastructure investment in a more deregulated environment. It is economically inaccurate to call the market share follower a monopoly. Second in addition to cable, a company like TELUS is facing new competition in the retail internet space in three areas. First the Inukshuk, Rogers and Bell fixed wireless play is making inroads at 2.5 and 2.6 Ghz. Second new wireless HSPA networks are being rolled out that will deliver downstream retail speeds comparable to some wireline internet today. Third satellite internet has proved to be another downstram alternative for consumers in rural and remote markets. Again this competition is enabled by billions of dollars of new investment.

Perhaps the most telling evidence of competition and investment is demonstrated by investments made by TELUS beyond the borders of Alberta and BC. By continuing to invest in facilities outside of its heritage borders, TELUS has been executing a national growth strategy that has led to it winning major contracts from the Governments of Ontario, Quebec and Canada away from Bell and other carriers.

Competition is real and investing in the future works. Rhetoric can buy time from government to live under a regulated umbrella (maybe) but it won't support a sustainable business strategy in the face of very real competition.

Friday, September 4, 2009

Bizarre letter raises concerns for safety of banker at CRTC hearings

Just when we thought that the endless regulatory summer from Hull could not get any weirder, lawyers for an alleged (by them) Canadian wireless carrier filed a request for a secret appearance by a secret banker or other financial institution (hmm who could that be we ask?) with secure access to in-camera CRTC hearings so that other Canadian carriers could not be in a position to identify and subsequently do bad things to said secret banker or perhaps his or her friends and family assuming that such friends and family exist.

In summary, the lawyers for the alleged (by us) foreign carrier requests a ruling from the Commission that it will not disclose any information regarding the name or other identifying characteristics of the Bank or other financial institution that may appear at the hearing on this matter to deal with evidence of ******’s (we have removed Globalive’ s name to protect their identity)past, current and projected financing plans and that the CRTC provide secure access to the hearing room for the bank or other financial institution so that representatives of the incumbent wireless carriers or the public cannot ascertain the identity of the bank or other financial institution.

Your erstwhile blogger, having a rather checkered and unfortunately non-anonymous career in regulatory matters, can remember no request quite so bizarre or unprecedented. Not to say that these things never happen in Canada. Why it was only back in 1958 that former Soviet spy Igor Gouzenko appeared on Front Page Challenge wearing his trademark hood to protect him from KGB hit squads.

Whendogsrunfree recommends watching the clip of Igor’s appearance to get a feel for what the CRTC in camera panel hearing may look like. I think you will agree that Fred Davis made a wonderful Chair for that panel. http://archives.cbc.ca/politics/national_security/topics/72/.

While it is a given that in some countries wearing hoods in public is a good idea for reasons of personal safety, Canadians have generally shunned this practice and even our American cousins tend to look askance at the few remaining relics of the past who see hoods and sheets as some sort of fashion statement.

Now I don’t disagree that TELUS will take a hard position on matters of law and principle (like we think as a matter of law and principle that a foreign entity holding 65% equity and 98% debt of a company makes that company foreign), we don’t tend to act like the KGB when it comes to problem solving and as far as we know have never forced our competitors or critics a state of paranoia that requires a hood (although it has been rumored but not ascertained that Michael Geist is prone to Ray Ban’s when near an angry crowd of TELUS employees).

As for the need to protect bankers from the public we can only suggest that after the financial collapse of the last year that they might want to consider the Igor look regardless of the CRTC ruling on this nutty request.

Thursday, August 20, 2009

Hard rain falling on CRTC

Next time I share some corporate sushi with my good friend Phil Lind I am going to have to explain how it was I came to the defense of the CRTC. Now usually when Phil and I get together and talk about the CRTC the topic of the best way to blow it up for crimes real (fee for carriage)or imagined (cant think of any right now :-)usually comes up in the conversation. Luckily Phil being a mellow force in the media world usually calms me down. But even so how to explain this blog to Phil where in the midst of corporate nashing of teeth over fee for carriage and potential ISP taxes, I find myself actually challenging an online petition called disolvethecrtc.ca aimed at shutting down the CRTC and replacing it with some secretariat or politburo with delegated authority to speak on behalf of the people.

The premise of the petition seems to be that the CRTC is too reflective of corporate interests and not concerned with the public voice. Now this comes as a surprise to me since I measure my effectiveness from various cuts and bruises recieved from regulators ( I should be out of hospital soon,thanks for asking). That's why on bad days I yell like some corporate anarchist about blowing up the CRTC,Industry Canada or whatever government body has upset me.

Yet I must admit as a revolutionary, I am clearly not worthy . For as reported through the blogoshere and on cbc.ca the petition to disolve the CRTC has legs .The CRTC's crime you ask having waded through 3 paragraphs to get here? Well crime of the century. The CRTC approved a Bell tariff that included consumption -based rates for wholesale services. Now maybe I am old fashioned and out of touch (don't comment back, your repartee would be too obvious) but when did it become a crime for an economic regulator to approve a bulk rate that varied on volume consumed? Isn't that how most products are priced ? Take other regulated products like electricity or water.

The petition shows the power of the Internet to change things . And it is a powerful tool indeed but also a dangerous one . As powerful as the Internet is for the power to communicate and share ideas it is also a powerful tool to affect political power in good and bad ways depending on who manipulates the tool. In this case what egregious crime was commited? None that I can see although as in any regulatory decision affecting price there are winners and losers (and I have seen lots of losses ).

Stuff that comes out of the Internet like disolvethecrtc is often good as quick news and fun for those of us that increasingly process information in tweets and blackberry messages. The validity of the arguments behind this petition only make sense if you dont think about them ;actually a new type of thinking now popularized in a world of instant messaging where reason is made sacrifice to speed, emotion trumps rational thought and gossip and inuendo can have as much force as fact.

Not thinking too hard is a recipe for chaos. As powerful as as the Internet is for a rebalancing of power in a democartic sense, it is also open to manipualtion in a world where the time for sober second though gets lost in the noise.

Thus my support for the CRTC on this one .It is well within their mandate to do this . And yes maybe we do need a new approach to regulation, but surely before we do that government,users and suppliers in the ICT and digital media realm need to keep working towards some consensus on a national strategy . The design of regulatory bodies should follow the strategy not lead it.

The Internet is a powerful tool for change. It has been used to provide voice to those that had none in an analog world. It was used to elect a President. But its a tool that often sways opinion without fact or attribution. As the Internet becomes a tool to affect power it will be increasingly adopted by the powerful (like political machines in Chicago). Its a two edged sword and it enables quick learning. Imagine a couple of old GR warhorses over some corporate (yet sustainable ) sushi suddenly seeing the light. Imagine if they decided that rather than advocating blowing up the CRTC when it did bad things to their interests ,they help fund viral campaigns to blow up the CRTC for totally unrelated reasons that the Internet rebels thought were their own .Hmm welcome to the future where it will be increasingly hard to figure out who's agenda is whose .

Note to self .Call Phil .Got an idea.

Tuesday, August 11, 2009

Lets spend as much on ICT as Obama is spending on cash for clunkers

Yesterday Tom Jenkins wrote an op-ed in the Globe lamenting a lack of any ICT strategy for Canada (agree) and once more echoing the concern of all who repeat the mantra the Canada is falling behind in our broadband leadership. The problem is that I do not buy the thesis (not to say we dont have huge investment challenges) . I sometimes think that with all the cutbacks in the newsrooms of the Country that what now passes for fact is often what was once rumour online but subsequently repeated often enough to attract a patina of dogma. I have ranted on this before but let me try again.

A lot of the concern on our broadband gap stems from a recent OECD report that showed Canada dropping in the global broadband ratings .That is concern indeed when once the Industry department under John Manley, Kevin Lynch and Michael Binder was able to brag that Canada was numer 2 or 3 in the world when it came to broadband penetration. Oh woe is Canada for now we have dropped fast and can no longer boast that we are world leaders. But wait according to the data we are still best in the G8 but who gives a toss about that eh?

One could argue that canada leading larger G8 economies is an accomplishment. But what about those irritating Danes who score above Canada. Will the insults never stop . First they steal our cod and then place nefarious land claims to rocks somewhere in the Artic. How can a country with a land mass the size of Denmark have rolled out more broadband than Canada. Shameful indeed.

Worst still we trail Luxemburg a country the size of Missassauga. What is Hazell McCallion to do about this insult to our sense of nation.

Ok so Tom has a point . ICT is critical and government should spend more time on that than propping up the old economy. But let's figure out a way to measure the "problem". I would submit that our measurements are unsophisticated and outdated. The OECD reflects the world of 2008 but even there its not clear what's measured is valid.
  • Most cable modem service is not reflected in the OECD report even though cable has more broadband share than DSL (add in the real cable count and speed and penetration jump)
  • By 2010 Canadians wil be able to access multiple HSPA networks delivering the fastest speeds in the world(HSPA will deliver broadband at speeds in excess of some landline speeds today
  • In order to assess our ability as an economy to benefit from broadband we need better measures of the quality of our enterprise networks (total broadband penetration is great for bragging right but business access is a bigger driver of productivity)
  • If we were to measure what our broadband penetration will be by 2010 in a way that includes cable penetration, new wireless broadband and our enterprise infrastructure then I bet we would still top the G8 (although the US would be at the top as well). We would still lag Korea or Japan for pure speed but that's a result of industrial strategy and intervention more than business investment.

So I can agree with Tom Jenkins that we need to focus on ICT in this country. And he and the ITAC community can count on support from TELUS on pushing an ICT agenda. I also believe we can accelerate investment with less regulation and fees and more improvements in capital cost allowances and tax credits for commercial development . That would sure help drive our efforts to increase investment in fiber to the home (which is a challenge) .But I am tired of the continued references by opinion makers to problems in broadband that dont exist or are overstated.

So step1 in Canada's new ICT strategy. How about our government working with the OECD to actually input reality into these global scorecards we so emotionally tie ourselves to? And bigger step 2 ,lets incent as much investment in broadband and IT as Obama is spending on cash for clunkers.

Thursday, July 23, 2009

The anonymous assasssination of Marian Hebb

An article in Straight.com from Vancouver struck me just how much free speech can suck online. The article which supports a levy I disagree with (as a voice for an ISP) was never the less well thought out . The author a lawyer named Marian Hebb had proposed that

Copyright infringement has become a habit for many ordinary Canadians—at school, at work, and at home. When they scan a short story or an article, or download a photograph from a Web site and send it to family, friends, and colleagues without permission, they are infringing copyright.

Ms Hebb who advises writers on copyright had suggested that writers were entitled to credit or compensation for works used or downloaded online through a collective licence. Not a radical proposal , if perhaps the thin edge of the wedge for the imposition of similar levies on consumers that may or may not see any benefit from such fees . However what struck me most was the all too common and nasty comments from the internet freedom fighters who snipe endlessly, under a cloak of anonymity, at all who carry different views from theirs.

Brian1234 for instance suggested that Marian was ... nothing but another levy-promoting do-gooder trying to dig your hand into as many Canadians' pockets as you can. If your profession is not paying you enough, get another job. I certainly won't miss reading tripe like this.

Pounder (one can only guess at what he pounds besides his head againsts brick walls) argues even more eloquently that The author looks to be the age of most politicians who are behind these various corporate lobbied bills; and whom have not a clue about how the internet in general is used by people under the age of 45. I suggest doing some reading on the issue Ms Hebb before writing anymore ridiculous commentaries that only show your age and ignorance of the information superhighway.

Right on Pounder you tell the oldster to get stuffed. (Hint she is younger than me buddy).Seriously if we are into tossing names as a substitute for debate what kind of moron that proports to comment on Copyright has to call himself Pounder? Is Pounder hiding behind a fake name in fear that Marian might come over to his Mom's basement and spank him. How fearless. Freedom fighter indeed.

So is this is what the fight for net neutrality is all about? The right to opine in 140 characters or less and to boil down complex debate into nuggets like "you suck". Great. With all the opportunity for enlightenment that the Internet offers we get"Pounder" and his ilk instead.

Perhaps a quote from Thus Spoke Zarathustra by Friedrich Nietzsche says it all about what passess for intellectual discourse from those that lurk anonymously online

Life is a well of delight; but where the rabble also drink, there all fountains are poisoned.

Saturday, July 11, 2009

An intrusive but arguably reasonable synapse adjustment inside the brain of an unamed CRTC Commissioner.

Officials of Truth and Reconciliation on the Internet Pogrom (TRIP) denied rumours that they had been involved in any redactive intervention resulting in an intrusive but arguably reasonable synapse adjustment inside the brain of an unamed CRTC Commissioner. Speaking on behalf of the Canadian Human Left Commission, in turn commenting off-record on behalf of unamed CRTC spokespersons, TRIP suggested that reports that parts of the text of the CRTC New Media decision had disappeared were false. "Only ISPs shape or otherwise degrade content online, just ask anyone on Twitter" said the Tripster spokesperson to requests for comments from from Dogs Ran Free.

Dogs Ran Free became curious about allegations of brainshaping when reports surfaced from a July 8 post of Mr.Stephen Taylor that a paragraph containing the following comments had been digitally erased from our conciousness. The paragraph attributed to a loquatious CRTC Commissioner ,assuming it had ever existed,which, according to sources, it didn't because it does not exist on the CRTC site today and therefore cannot have existed in the past without offending the laws of physics, would have stated:

"The history of the regulation of speech in this country does not engender confidence that such powers will be used wisely. Canada has experienced several instances in recent times where regulatory commissions of another type and armed with a different mission have challenged the right to say controversial things. The struggles of Ezra Levant, Mark Steyn and others have served as important warnings that regulatory authorities charged with combating racism, hatred, and other evils have consistently expanded their mandates, have abused their powers and eroded fundamental liberties. Wherever there is official orthodoxy, disagreement is heresy, and where there is heresy, there is usually an inquisition to root it out. After centuries ridding ourselves of thought control agencies, 20th century Canada re-invented them"

According to TRIP (but not for attribution) no one can seriously believe a government document would ever have contained such right wing twaddle to begin with. And if it it had then surely the Globe or Post would have covered it rather than MJs funeral. "We dont know who this wanker Taylor is" said TRIP "But dont blame us if he gets a visit from CISIS."

Attempts to reach CBC were unsuccessful as it was rumoured CBC was too busy not working this weekend to erase wafergate footage from the web. "Bull, they did that last week" alleged the TRIP spokesman.

CTV claimed no knowledge of any of this, since they cannot afford to do news unless people give them more money. "This never could not have happened without due process " said CTV " We love the CRTC . They are going to give us lots of money from the cable guys,(who probably blocked the paragraph to begin with) and then we will cover important events like Canadian Idol again"

TRIP confirmed that "the redaction that wasn't" rumour was likely started by serial traffic shapers like Bell and Rogers, in order to shift the blame for the collapse of the Internet and free speech from their practices to the CRTC and other elements of government tasked to ensure peace ,order and good government.

Canada's security services suggested there is nothing they can do to confirm or deny all these rumors until Parliament passes legislation to allow them to sniff the web.

A spokesperson for TELUS suggested that it had no idea what what the fuss was about. "If that were true it certainly does not seem the least restrictive way of thought-shaping. However we never read these descision anyways, they just bum us out. We get our opinions shaped by Twitter"

Thursday, July 9, 2009

I remember the day we got a second TV network

As we prep for our appearance at the CRTC tomorrow, I feel somewhat disconnected from the reality of choice facing me online and the "threat" to the distribution of content online because of vertical integration. PS yes I completely agree blocking access to content sucks.

Maybe its my age that leaves me ever astonished by the sheer magnitude and diversity of content online today. I can remember back in 1961 when CTV came to Ottawa and I got to watch all these cool TV shows for the first time. Whow two TV networks. It was magic. Black and white and no remote but magic. Choice is a relative thing I guess.

We got cable in 1966 and again a new world opened up. I remember being able to watch NBA for the first time. And as the 70s kicked in, FM alternative did too launching the background noise for the revolution.

Flash forward and choice is awesome on TV, sat radio, the web. Its good and awful, trite and compelling and often beyond my grasp. But its beyond cool and I get nervous when anyone wants to tell me what I can watch or listen too. Assuming its legal. But as I get bogged down in the whole net neutrality stuff happening at the CRTC. I find myself wanting to escape the maddness and rhetoric and put the new Wilco CD onto my ITouch. I want to just go back to surfing and absorbing the flow. (Ok so that's a bit of a stretch since I am blogging as I listen to the CRTC hearing).

Reality check here. The Internet is not falling apart under the sway of the vertically integrated. Maybe the studios still dominate the Brittany Spears content space but this is also the golden age of indie. We really dont have to but the studio stuff anymore.

So for sure lets make it clear if it is not already obvious public policy. An open Internet is de facto good. The Internet is about the free flow of information and messing with that free flow is de facto bad. The CRTC should be prepared to deter bad actors that limit choice. Just don't expect me to believe much of the rhetoric online . Let me start by calling into question the assumption that the ISPs are hurting the independent production industry in Canada. The industry presented this as fact yesterday without an iota of evidence. And let's all worry lot when this story becomes national news without any research.

Maybe I am getting old but freedom to publish bs, does not make the bs true. Man do we need some filters. Personal and self-supplied of course .

Saturday, July 4, 2009

Mulligatawny neutrality or what's cooking at the CRTC

Finding consensus on the definiton of net neutrality is a lot like getting agreement on the best recipe for mulligatwany soup. There is no definitive recipe for the soup anymore than there is an absolute perscription for ensuring neutrality. That's likely what the CRTC will end up concluding from its public hearing on traffic shaping next week. The so-called "Review of the Internet traffic management practices of Internet service providers" is officially not about net neutrality, at least not anymore than the North Korean missile launches on July 4 were not about Independence day in the US.

I was going to do some prep for the hearing on my week off but its been raining so I have avoided my binder. But I have been thinking about NN (really). I have been thinking that the CRTC is in a bind. On the one hand, they support many of the principles of non-discrimination that underlie neutrality (like the prevention of undue preference by ISPs) but when it comes to Canadian content online some Commissioners likely support preference and discrimination for Canadian products even if that ultimately impacts access to non-canadian content.That's how the broadcast system operates today and its how content rights markets operate or at least attempt to operate in a digital world.

Net neutrality advocates are concerned about ISPs creating preferences for affiliated content and the threat of the "so-called two-tier internet". Yet many in the cultural community like the idea when it comes to preferring Canadian content and even advocate preference under the banner of net neutrality (more beaver tails less curry in their soup).They are not alone in seeking discrimination in the "public interest". In fact at the New Media hearing a lot of the Commission's attention was focussed on the idea of preference and priority lanes for Cancon. That's hardly neutral thinking . But then most things are not black and white.

Wednesday, July 1, 2009

Broadbandwagon

I have been bugged a lot by all the angst over the OECD broadband study that shows Canada falling behind in the broadband race. Pundits, politicians and media have all jumped on the data to bemoan our limp results. Most of this handwringing isn't based on much independent thought.



Arguably the results are not so bad when you consider that new 30, 50 or even 100 meg cable modem services aren't adequately reflected yet or that the results can't capture the big 3G HSPA wireless launches that are planned early in 2010. Not so bad when we realize that trailing small domains like Luxembourg (pop 500k or so) or Denmark is a not particularly relevant. Pretty good when you check the OECD hit parade and find that we still lead all the G8 (hey that's something worth noodling is the G8 tanking or do we hold a trading advantage?) . Mind you not so good compared to Japan or Korea. But here is the killer question we have missed? So what? I mean what is the goal.



How fast do our networks have to be in the consumer space for Canada to be globally competitive. As a consumer I say bring it on .The faster the better. Of course I don't actually buy the fastest today because the 7/8 meg service I have gives me all I need . But I get it . Build a faster network and someone will fill it with good stuff like games and movies. But has anyone ever tried to measure the economic advantage that comes from each 10 meg jump in speed . I bet its not linear.



The reason I am asking this question, which to some degree questions my own broadband dogma, is because I have been pplaying with a 512Kps satellite service at the cottage. (still raining)I guess its a bit slower than what I am used to a home or the office but the lag is in seconds and managable even for someone suffering from ADD. Over the last few days I have been surfing and twittering, doing e-mail,downloading files and I even made a web page to post this on . All at half a meg. Pretty radical for a post-war boomer.



So back to my question . What's the right metric? It's an important question for our national ICT strategy. Faster and bigger for sure but if we don't catch up with Japan or Korea soon are we toast or just envious?

Tuesday, June 30, 2009

Nowhere to hide

Lake Pemichangan: Its raining and cloudy and boring and grey but nice in a mellow way. Using my free time to build a Twitter space which led me to creating my own blog..all because the satellite guy came to the cottage and connected me up to the internet. Its all actually twisted fun since I discovered Malcolm Stanley down in Philidelphia (see http://soaringhorse.blogspot.com/) and his site had all these recommendations for great sci-fi books like Stand on Zanzibar and Anathem which are just the best. And I was checking out who Norm Bolen was following and 2 links later I came across an old friend from Elgin Cafe days named Anne Bourne who is looking as cool today as she was then...and that is very cool.

So just right now Leslie calls to tell me they are going to take Lars of the respirator in Denmark and that kicks the buzz sideways. Yesterday Chris e-mailed to let me know Michael Sullivan passed away in Washington from the cancer returning and I never thought that dinner at Hook two years ago was goodbye. Both guys made you laugh in a heartfelt way and left you better for their company. it just started to rain again.

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