CRTC questions need for mandated wholesale access as mobile broadband rises

Next-generation wireless networks could make mandated wholesale access to the incumbents' Internet and telephone services unnecessary, the CRTC said in a new report released Thursday. The commission report, entitled Navigating Convergence II: Charting Canadian Communications Change and Regulatory Implications, says wireless could become a viable third option for consumers of telephone and Internet services. Right now, due to a lack of facilities and high building costs, the commission mandates the incumbent wireline providers to give competitors access to wholesale services on their cable and DSL networks. “Wholesale requirements are generally applied to cable (e.g., DOCSISx.x) and copper-based networks (e.g., DSL). The introduction of next- generation networks will raise questions about the necessity of mandating access to wholesale services,” the report says. The commission writes that the incumbent, facilities-based providers see “overly interventionist regulation” as counter to the requirement for network investment. The incumbents instead argue that consumer demand should drive the need for increased network capacity and that competition without mandated access is sufficient. The report, which follows a similar report released last year, addresses major trends in the communications sector, including “an environment characterized by greater-than-anticipated consumption of content from Internet sources, further consolidation within the communications industry, substitutability of services, a proliferation of communications devices, and network traffic growth for both fixed and wireless networks.” The commission also raises the possibility that increased mobile data traffic could lead to a “spectrum crunch” that results in poor service, price increases, traffic management and lower data caps. The potential for wireless to serve as substitution for wireline high-speed Internet, as HSPA+ network rollouts become widespread and smartphones are adopted in greater numbers, will further contribute to the crunch. The report cites an Ericsson study, released in March 2010 and which predicted mobile data traffic to double annually over the next five years, as well as predictions by Cisco Systems Inc. in its Visual Networking Index. “Consumer use of mobile devices at home or work can be technologically inefficient,” the report says. “Cisco’s estimates that most mobile Internet device use does not occur while the consumer is on the move: 40 percent of time spent using mobile Internet is at home, 35 percent is on the move, 25 percent is at the office … In Canada, 21 percent of smartphone and tablet traffic was offloaded to the fixed network in 2010. This figure is expected to grow to 34 percent in 2015, according to Cisco’s Visual Networking Index study.” The report says the spectrum crunch could be mitigated by encouraging greater use of wired networks when possible. The commission report also looks at advertising, remarking that ad revenues for conventional TV have rebounded in the post-recession period but that online and mobile advertising could fragment the market. The CRTC cites figures from the Internet Advertising Bureau that show online advertising in Canada increased by double digits during all but one of the past 10 years. “Online advertising revenues grew from $98 million in 2000 to $1.82 billion in 2009. They are forecast to grow by 15 percent by the end of 2010, rising to $2.1 billion,” the report says. Canadians spend more time online than any other nation (43.5 hours versus the worldwide average of 23.1, according to Comscore) but still 89 per cent subscribed to TV services in 2011, according to the Media Technology Monitor. The CRTC report also focuses on over-the-top content services and their impact on program rights, Canadian content and the regulation of the broadcasting system—many of the issues raised in the commission’s fact-finding consultation in the spring. The report raises the possibility of U.S. studios selling the Canadian digital content rights to Canadian distributors on a non-exclusive basis. The studios could also offer their content directly to Canadians online, the CRTC says. “However, because the online distribution of content is in the early stages of developing its own stand-alone business model, and because consumers are interested in this content, the incremental value for digital rights may rise,” the report says. “This may signal increases in the overall value of the package of rights as there are more windows of exploitation.” The report notes that over-the-top services operating in Canada are exempt from regulation and could impact the industry, “which warrants consideration of further regulatory flexibility.” There is no consensus on how to level the playing field, the CRTC adds, with creator groups seeking an extension of Cancon obligations to exempt over-the-top services and some distributors pushing for a relaxation of the rules. The report considers the unique role that the CBC and Radio-Canada could play in a scenario where declining broadcast distributor revenues lead to shrinking subsidies and incentives to promote Canadian content. “In the view of many, public broadcasters will play an important role in ensuring the availability and diversity of high-quality Canadian programming,” the CRTC says. “There may be a need for regulatory flexibility where reduced revenues threaten ongoing commitments by private broadcasters. However, the degree to which private entities may have their obligations reduced commensurate with potential increased funding to the CBC/SRC is debatable.” news@thewirereport.ca

CRTC questions need for mandated wholesale access as mobile broadband rises

Broadcast | August 18, 2011

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