Canadian telecommunications sector “in state of crisis”, Senate committee warned

Canada’s telecommunications industry – considered a global leader just 10 years ago – is now in a state of crisis following years of neglect by successive governments, the absence of a national digital strategy and a “cozy uncompetitive environment”, University of Ottawa law professor Michael Geist told the Senate Committee on Transport and Communications last week. More spectrum and more foreign investment are needed to reverse this downward spiral, he warned. Described by Senator John Wallace (C: NB) as “a no-holds barred assessment” of the telecom industry, Geist provided the committee with a grim overview of the state of the telecom sector, saying that Nortel’s epic fall from grace, combined with high mobile data rates and a slipping global ranking for network readiness, have put Canada near the back of the pack of western countries. “The Canadian telecommunications scene is in a state of crisis. That is no exaggeration. I do not use those words lightly,” the Canada Research Chair in Internet and E-Commerce Law told Senators May 26. Geist was the latest witness to appear before the committee as part of its review of the country’s wireless sector – although Geist urged Senators to take a broader view. He said Canada’s telecom problems “are not easily divisible”, saying the biggest issues are with wireless access, broadband and network neutrality. For example, Canada ranks 75th in terms of the number of mobile subscribers according to the World Economic Forum, trailing countries such as el Salvador, Kazakhstan and Libya. Likewise, with mobile pricing, Geist noted that Canada has significantly higher rates than the UK, Singapore, Italy, Sweden and Norway, primarily because of a lack of competition, particularly in the GSM space. The result: lower consumer adoption of mobile Internet and other wireless applications, such as web-based email and online mapping services. While the CRTC is scheduled to conduct hearings on the issue of network neutrality this summer, Geist urged the government to “stand ready to act, as other governments around the world are ready, in case the regulator were to conclude that the current law is unable to address net neutrality concerns.” Freeing up more spectrum will also help, he said. This includes using the white spaces between television channels and the 700 MHz band that will open up when television broadcasting migrates from analog to digital. Better yet, Geist said government should include a mandatory open access requirement in the next spectrum auction so that carriers, device manufacturers and service providers “would have the freedom to interconnect and engage in innovation here in Canada”. Geist didn’t shy from putting the highly charged issue of foreign ownership on the table, saying the current restrictions limit the amount of capital available for infrastructure builds, which in turn is limiting Canadian competition. “We are seeing all kinds of creative mechanisms in an effort to circumvent the current rules,” he told Senators. “Everyone claims to be playing by the rules and that the voting structure of these new entities is in the hands of Canadians, but it is a bit of fiction. Most people recognize that it is expensive to establish new networks for new providers, and they have to look for foreign capital.” Another way to improve mobile uptake, he suggested, is for Canada to follow the lead of other countries that have placed caps on the length of long-term contracts and on roaming charges. More hands-on regulation from the CRTC would also help, added Geist. According to an OECD report released this month, Canada ranks ninth in broadband penetration among its 30 member nations, ahead of the UK, France and the US. More concerning, noted Geist, is that mobile pricing in Canada is higher than many other countries and its internet speeds slower. ........................................................................................ OECD Report on Global Broadband Canada’s Ranking (out of 30 countries) Broadband penetration: 9th Monthly subscription costs: 14th Internet speed: 24th Fibre to the home: 0% ........................................................................................ Who’s to blame? The solutions are not easy, Geist stressed. As a first step, he said governments need to make a firm commitment to universal broadband access, and develop a strategy for faster networks. “This might mean more competition, market-based incentives and potentially community-based networks as local communities take this issue into their own hands.” Senator Rod Zimmer (Lib: Manitoba) asked who is the blame for the current problems: “Where is the blockage? Is it CRTC? Is it hoarding by the operators? What can be done? What do you recommend we do and put in our report to whoever to get this unplugged?” Geist agreed the regulator deserves part of the blame. “We have the CRTC – to be honest – asleep at the switch, particularly on this broadband issue, on the wireless issue. They have not been involved at all... There is a perception that they may be overly cosy with some of the companies that they regulate, so there is ample reason to lay some of the blame at the CRTC.” However, he also acknowledged that the CRTC has been hamstrung by having to govern under two separate pieces of legislation – the Telecommunications and Broadcasting acts – noting that both laws should be updated and merged into a single act. Geist also took aim at the Competition Bureau of Canada for allowing Fido and Rogers Communications to merge, “taking away the only competition we had in the GSM space.” Then, he added, there’s the current Conservative and previous Liberal governments which have continued to rely on an outdated digital strategy to guide their policy decisions. “There has been no digital strategy for Canada for more than 10 years now, while we see other countries move ahead more aggressively. I think we can look to all of these players to say that they have let us down, quite frankly.” Time to consider a new minister for digital Senator Pana Merchant (Lib: Sask), who along with other members of the committee traveled to Paris and London last week for a first-hand look at their countries’ wireless activities, noted that other countries have comprehensive broadband plans: “France has France Numérique 2012 and the UK has Digital Britain. Should Canada have a comprehensive broadband plan?” According to Geiest, yes. “If there is one crucial recommendation to be made from a big picture perspective, it is to recognize the need for a broad digital strategy, not only digital broadband.” Such a strategy, he noted, should span both the wired and wireless sector, and deal with issues such as net neutrality, copyright law, the transition to digital over-the-air TV, privacy, e-commerce and digitization of Canadian content. Senator Wallace asked if Canada needs a new entity that would be responsible for developing and implementing such a plan. Rather than creating a new government department, Geist suggested a new minister be appointed who would be responsible for digital issues, as well as a chief technology officer, as the Obama administration has done in the US. “If you had both a CTO as well as a minister responsible for many of these issues, the minister would be affecting policy and pushing through that process and a CTO would be doing the research and metrics to ensure that government is a leader and not a laggard in terms of adopting some of these technologies and moving forward on open source and related issues... We have seen this in other countries, but not in Canada yet,” said Geist. “Part of the blame is that we have an overburdened minister... There simply is not the requisite time to deal with the issues effectively.” Senator Dennis Dawson (Lib: Lauzon-PQ) asked if there was one country Canada should look to as a model. Geist recommended South Korea, where greater telecom competition has resulted in lower prices and much faster speeds. Keith Parsonage, Industry Canada’s DG, Information and Communications Technologies branch, appeared before the Senate committee May 12, and CRTC officials on April 22. The next scheduled appearance is by Barrett Xplorer Inc. on June. 3

Canadian telecommunications sector “in state of crisis”, Senate committee warned

News | June 1, 2009

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