Canadian Telecom Summit: At the annual combative regulatory panel, the gloves come off

The Harper government has virtually declared that incumbent carriers won’t ever be able to get hold of prized AWS spectrum of wireless startups. But that wasn’t always Ottawa’s plan, a Rogers Communications Inc. executive has told a conference

Industry Canada was prepared six years ago for incumbent carriers to buy troubled wireless startups, Ken Engelhart, the carrier’s senior vice-president of regulatory affairs told the Canadian Telecom Summit on Tuesday.

Shortly after the government announced it would set aside spectrum for new entrants only to bid on in the 2008 AWS spectrum auction — which brought Wind Mobile, Mobilicity, Videotron and Eastlink into the wireless market — Engelhart recallled he was in the office of an assistant deputy minister vigorously objecting to the plan.

Or, in Engelhart’s words, he was “ranting and raving and frothing at the mouth” at the new policy: Not only was there spectrum incumbents couldn’t buy at auction, there was a five year ban on incumbents buying the frequencies of new entrants. Why do this, Engelhart asked, when any new carrier would be insolvent in five years?

“‘First of all, I think you’re wrong. I think they’ll do just just fine,'” Engelhart quoted the bureaucrat saying, “But secondly, even if you’re right, that just means in five years you’ll  buy them.'”

“So,” Engelhart told the conference, “the intention at the department clearly was five years ago was that when the five years ago was up and the incumbents weren’t doing well the incumbents could buy them.”

His complaint was that the government’s intention over the years has changed. Instead, he said, it should let the private sector compete.

For his part, Wind chief regulatory officer Simon Lockie said “the government has policy objectives and should be commented for sticking to their guns.”

Whether it’s true policy has changed — and Engelhart only cited one civil servant — it was another example of the free-for-all at the annual “regulatory blockbuster” session at the conference, where a panel of lawyers for carriers toss barbs at each other and Ottawa, often quoting each others’ previous statements to make their points.

Certainly the incumbents thought the wireless rules were clear: After five years they could have a shot at buying out competitors and their spectrum. That’s what they’ve been doing for years — in 2000 Telus bought Clearnet Communications, allowing it to become a national wireless carrier, while in 2004 Rogers bought Microcell (Fido).

On the other hand, the Harper government specifically created the auction set-aside to bring in new competitors into a market dominated by three carriers.

That changed last year when then Industry Minister Christian Paradis spurned an offer Telus made to buy financially-troubled Mobilicity when the five year ban expired. Ottawa has been silent on proposed deals Rogers made to buy unwanted spectrum from Videotron and Shaw Communications when their five year bans expired. The assumption is the silence means the deals are dead.

So once again — as always — the debate at the regulatory panel circled around (alleged) inconsistent government and/or regulatory telecom policy that in cellular gives competitors access to incumbents networks for roaming and their towers for sharing antennas, while on the wired side gives competitors access to fibre optic networks .

Ted Woodhead, Telus’ senior vice-president of regulatory policy, complained this is an era of “unprecedented regulatory activity” in Canada. “Regulators need to understand that regulation is a last resort,” he said. “They should favour markets over regulation. If we do that the future will look bright. If we don’t I’m afraid we’re in for perilous years.”

Jonathan Daniels, Bell’s vice-president of regulatory law, warned against policies that would create the kind of telecom “investment crisis” seen in Europe. Wireless adoption there is much less than it is in Canada and the U.S., he said, because of those policies.

Regulators have to recognize that not only do consumers want lower prices, he said, they also want quality service.

Daniels, Woodhead and Engelhart argued that the government should stick to policies that encourage competitors to put money into building facilities rather than piggy-backing on the networks of incumbents.

But Chris Tacit, lawyer for the Canadian Network Operators Consortium (CNOC), which represents a number of major independent Internet service providers, said those facilities are controlled by carriers. To increase competition, some access by competitors has to be ordered.  “Otherwise,” he added, “competition will die stillborn.”

Telus' Ted Woodhead, centre, makes a point to Bell's Jonathan Daniels, right, and Chris Tacit. ITWC photo
Telus’ Ted Woodhead, centre, makes a point to Bell’s Jonathan Daniels, right, and Chris Tacit. ITWC photo

Incumbent carriers have benefits of already negotiating rights of way for their wired networks through ducts and pole access for wireless networks, Tacit said.  To catch up, competitors need proper wholesale regulation where incumbents have to justify how much spare capacity they have.

That led to much sparring on how much investment competitors are willing to put into their own networks, with Engelhart pulling out a transcript of a previous CRTC hearing where CNOC members said if they were given access to new fibre networks of incumbents it would help their revenues enough so ISPs would eventually spend on fibre in their areas — the so-called ladder of investment argument. Instead one ISP — Teksavvy Solutions — has said building fibre to its customers homes isn’t feasible.

That prompted Teksavvy CEO Marc Gaudrault to step up from the audience to a microphone and declare that he will build fibre, when there is enough demand in an area.

Lockie said Wind has “spent a fortune building a new network.” It also spent its first year fighting legal battles “from these guys,” he added.  Long term, he also said, Wind doesn’t want to have the right of subscribers to roam on incumbent networks, he said, but for now it wants incumbents to only charge “credible wholesale rates.”

Finally, there was some discussion on the implication of last week’s Supreme Court of Canada ruling that police have to get a search warrant if they want carriers to hand over subscriber information. The case involved police wanting the name and address behind an IP address.

Engelhart noted that carriers had agreed that in the case of alleged child exploitation cases they would hand over information based on a letter from police. Last year Rogers (Nasdaq: RCI) was handed 711 such letters, he said, out of over 170,000 requests for subscriber information.

The bulk of those requests dealt with police trying to confirm a name and address they already. Whether those requests now need a warrant is unclear, Engelhart said.

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