Regulation and policy news stories from this month: CRTC denies Bell request; foreign ownership rules under review; Harvard academic takes shots at Canada; CRTC not interested in wireless "power grab"; Canyon TV takes on Telus; CRTC wants more documentation from carriers, looks at DAVE Wireless; the British fight for Nortel assets; and digital economy discussion paper in the works.

CRTC denies Bell proposal to freeze price cap during deflation

The CRTC nixed a request by Bell Canada to lock the 2010 price cap on local phone rates. Bell and its affiliates Bell Aliant and Telebec were concerned about potential deflation in the market, but the CRTC confirmed that they must pass down cost reductions to customers. Bell wanted the 2010 cap (for June 1, 2010 to May 31, 2011) to be zero, thus leaving rates unchanged should deflation have resulted in a decrease. In the decision the CRTC said that capped services could have reductions, with the notable exception of high-cost serving areas.

Budget makes telecom muddle official

Last month’s federal budget has confused opposition politicians and industry observers alike as to the nature of Canada’s new, more open approach to foreign telecommunications companies. The government declared it would boost competition and investment in the telecommunications sector with the intention of increasing innovation and lowering prices for consumers by removing foreign ownership restrictions on satellites.

"This will allow firms to access foreign capital and know-how and to invest in new and advanced technologies," the budget said. "The removal of restrictions will also allow Canadian firms to develop strategic global relationships that will enable them to participate fully in foreign markets."

The budget did not say that foreign ownership restrictions on other telecommunications firms — cellphone and internet providers, for example — will be lifted. However, that had been strongly hinted at in the preceding throne speech, as well as by Industry Minister Tony Clement in interviews afterward.

It is unclear how allowing foreign companies to buy Canadian satellites would result in lower costs for consumers, though the move on satellites seems to be the first step in a broader loosening of ownership rules. The House Standing Committee on Industry, Science and Technology is putting foreign ownership rules under a microsope, with four hearings scheduled to look at the issue. This follows on comments from Industry Minister Tony Clement that his department will be holding public consultations with an eye to opening up foreign investment the telecom sector.

Harvard report author urges Canada to change course

Yochai Benkler, the Jack N. and Lillian R. Berkman professor of entrepreneurial legal studies at Harvard University’s Berkman Center for Internet and Society, published a report re-affirming his previous findings that Canada lags behind other developed nations on broadband access, speed and pricing.
Benkler delivered a keynote address at the University of Ottawa's “Taking Stock of Tech” conference, saying that the Canadian government must do more than simply encourage foreign investment if it hopes to fix lagging internet speeds.

Benkler said that government efforts to open the market will have little effect if it doesn’t ensure that newcomers can have access to Canadian customers. Instead, opening networks to competition would see smaller players arrive, but it would also likely see large players trying to grab more share.

Benkler was critical of the Canadian system, in which a handful of competitors control access to broadband internet. He said The CRTC’s examination as to whether incumbent internet companies must lease parts of their cable or telephone lines to competitors will play a much bigger role in opening competition.

To improve internet competition in Canada, Benkler identified an area of concern that the CRTC has already drawn attention to, namely the effect of “bundling” services on competition. Benkler said unbundled access to a network allows competitors to apply their own electronics to the infrastructure, which encourages innovation.

Arguing that “innovation comes from the edge and rarely from the core,” Benkler acknowledged that criticism was understandable, but the argument that the big companies need such rules to ensure that they spend risk capital to facilitate innovation is overstated.

Instead, Benkler said open access and unbundling in other jurisdictions have allowed small and creative companies to enter the telecom market—where the cost of entry is very high—and grow from there.
"We are at a transformative moment," said Benkler, "What we do now will set the environment for next-generation connectivity."

CRTC misunderstood: no wireless “power grab”

A few weeks ago the CRTC called for a public review of the high speed wireless services market, resulting in some accusations of a “power grab”.

CRTC chairman Konrad von Finckenstein has said that there is “a little bit of paranoia”, and he was concerned about any impression that the regulator was reasserting itself more than is necessary.

In late January the CRTC said it would hold a full public hearing to review its hands-off approach to the business of high-speed wireless data or broadband transmissions. Then a CRTC staff report suggested the need for a new "regulatory framework" to "ensure all Canadians have access to affordable broadband service."

Understandably, the CRTC’s recent actions have been seen by some as an attempt to take on the wireless industry, which has been relatively free of regulation.

In fact Michael Hennessy, senior vice-president for regulatory and government affairs at Telus Corp, said that the document was “a regulatory manifesto for the perpetuation of regulation in the face of the incredible choice and diversity and individual freedom that the internet has provided Canadians.”

There seems to have been a significant misunderstanding. Mr. von Finckenstein has made it clear that there are no plans to extend the CRTC's regulations into the wireless world. Referring to a full-fledged transfer of regulations, he said that “we can't do it and we shouldn't do it."

The hearing itself will focus on the narrow issue of whether the CRTC should have the power to protect against wireless service discrimination. And Mr. von Finckenstein said the CRTC report was released because he believes staff work should be "transparent" to the industry, adding that the CRTC only steps in “where there is market failure."

Canyon TV files lawsuit against Telus Corp

The Alberta provincial court has received a lawsuit from Calgary’s Canyon TV against Telus Corp.

Canyon is seeking damages for a failure to carry its channel, essentially arguing that broadcast carriers should be required to air channels that have received CRTC licences because they fall under the Telecommunications Act.

A related complaint alleging that the incumbent broadcast carriers are engaging in anti-competitive behaviour has been filed with the CRTC.

“The CRTC publication on convergence issued in January 2010 clearly defines the nature of convergence and the effected licensing ‘In a converged environment, a BDU [broadcast distribution undertaking] that is also a TSP [telecom service provider] provides both telecommunications and broadcasting distribution services,’” says the Canyon TV complaint.

The CRTC approved Canyon TV’s application for a Category 2 specialty television channel in September 2009, allowing it to provide world beat and international music programming. However, Canyon says that Telus, Bell Canada, Rogers Communications Inc and Shaw Communications Inc, have refused to carry the channel.

CRTC wants more documentation from carriers

The CRTC is changing how it collects information on ownership structures, reserving the right to request additional information at any time.

Perhaps in response to the recent saga surrounding the ownership structure of Globalive Wireless Management Corp, and in anticipation of future scenarios involving foreign participation, the commission will now require information about the entire corporate structure of multi-layered carriers, including copies of agreements related to ownership and control.

The CRTC says this is “because of a significant evolution in the telecommunications landscape, including the development of increasingly complex corporate structures and financing arrangements.”
Required information now includes “details about the capital structure, shareholders, and directors of any entity—such as a corporation, mutual insurance company, partnership, or trust—that has holdings in a Canadian carrier.”

US to embark on "Internet Policy 3.0"

According to President Obama's top official at the Department of Commerce, The US government's policy of leaving the internet alone is over.

Instead, an "Internet Policy 3.0" approach will see policy discussions between government agencies, foreign governments, and key internet constituencies, according to Assistant Secretary Larry Strickling, with those discussions covering issues such as privacy, child protection, cybersecurity, copyright protection, and internet governance.

The outcomes of such discussions will be "flexible" but may result in recommendations for legislation or regulation, Strickling said in a speech at the Media Institute in Washington.

Strickling said that because the internet is now as much a social network as a business network, "we must take rules more seriously."

Examples include financial transactions, copyright protection, hacking, network neutrality, and governments worried about governance systems.

The United States has a unique role as the country that gives final approval for changes made to the internet's "root zone." The global internet is dependent on an address book whose contents are changed through a contract that the US government has granted to the Los Angeles-based Internet Corporation for Assigned Names and Numbers (ICANN).

ICANN recently adjusted its own agreement with the US government to give it more autonomy and now reports to the global internet community through a series of reviews. Strickling sits on the panel of one of those reviews.

Overall, this new approach could enable the US government to regain the loss of some of its direct influence through recommendations made in policy reports. But internet old hands will still decry the loss of a policy that made the network what it is today.

British pension regulator fights for Nortel assets

Britain's pension regulator is hoping to make some of its huge shortfall from Nortel Networks Corp, and  it’s doing it in a Canadian courtroom. The regulator has filed a $3.4-billion claim in an Ontario court, hoping to get some relief for the more than 43,000 Nortel pensioners who reside in Britain.

The regulator's move is into untraveled legal territory, and adds another layer of complexity to Nortel’s wind-down, though it appears that Nortel's restructuring team and the court-appointed monitor, Ernst & Young Inc, are willing to put up a fight.

The regulator is saying that it wants more say when Nortel's assets are divided up, in part because the immense cost Nortel’s collapse in the UK.

The development is making a lot Canadian Nortel pensioners unhappy: In Britain, retired Nortel workers receive benefits under the admittedly fragile Pension Protection Fund, and US pensioners receive benefits under the federal Pension Benefit Guaranty Corp.

CRTC review of DAVE Wireless

The CRTC plans to review the ownership structure of Data & Audio-Visual Enterprises Wireless Inc. (DAVE Wireless), the commission said in a letter dated March 5 and addressed to Stewart Lyons, vice-president of DAVE Wireless.

In the letter, the commission stated that it will hold a Type 2 review of the company’s ownership and control. The review appears to be a formality: there will be no input from third-parties, which the CRTC deemed unnecessary.

The letter said the commission “considers that the ownership structure of DAVE Wireless is of a sufficiently complex nature and that it holds precedential value for the industry and the general public.” The ownership review will look at issues such as the control of licensing, branding, debt, and patents.

Digital economy discussion paper on its way

Industry Minister Tony Clement told the House industry committee that his government will soon be introducing a digital economy discussion paper. This was no surprise to industry stakeholders, who were expecting consultation. Broadband access and digital and Canadian content are expected to figure prominently in the paper.  Clement expressed concern that Canadian business has not done its part to innovate in the digital economy. This follows on the call by CRTC chairman Konrad von Finckenstein for a Royal Commission or national panel to develop a national digital strategy.

2009 decisions to echo in 2010

The CRTC made a number of rulings last year, and 2010 promises to be just as busy. Incumbents won a decision allowing network owners to engage in internet traffic management. Independent service providers got a favourable ruling requiring network owners to provide matching speed options to wholesale buyers, though the cabinet has sent this back to the CRTC for review. Incumbents also won on usage-based billing for wholesale buyers of connectivity, and on a decision – upheld on appeal – that said Ethernet services are “essential services” that must be delivered by incumbents. Then, of course, there was the CRTC decision that new wireless entrant Globalive Wireless Management Corp was under foreign control only to have it over-ruled by cabinet.