Three telecom issues stranded by government defeat

When the Harper government fell, it left three important telecommunications-related initiatives on the table that Industry Minister Tony Clement has been pushing:

–Creating a national digital economy strategy;

–Setting the rules for the upcoming 700 Mhz wireless auction;

–Reforming foreign telecom and broadcasting ownership rules.

Will the parties make their positions on these issues clearer in the election campaign?

The three issues are intimately tied together.The goal of a digital strategy, the government has said, is to encourage businesses to adopt new information and communications technologies to strengthen the economy. So a government strategy might include setting a minimum wired and wireless broadband speed target Internet providers have to provide to households, because without adequate speed new technologies can’t spread. To go along with that, it might include a target of reaching broadband even the most remote households, for without ubiquity large swaths of the country will be left out. To make these targets effective, a time period would be set.

For example, in the United States the Federal Communications Commission (FCC) has set a goal of bringing 100 megabits-per-second service to 100 million American homes by 2020.

 STATUS: Clement promised in March the Conservatives’ digital economy strategy would be released this spring.

Assuming the government goes this way, carriers might need to boost their infrastructure and therefore need to find considerable financing — possibly from foreign investors. But at the moment the Telecommunications and Broadcasting acts prevent foreign companies from controlling Canadian carriers.

Clement promised reform after the cabinet had to overturn a ruling of the Canadian Radio-television and Telecommunications Commission (CRTC) that the parent of Wind Mobile wasn’t controlled by Canadians. But his goal of presenting legislation last fall was derailed when the government realized foreign ownership is also tied to the spectrum auction and the Conservatives’ desire to encourage competition.

The auction, likely to be held next year, will play a major role in the broadband infrastructure for the future. The 700 Mhz band is highly prized for is ability to efficiently carry signals, making it ideal for so-called fourth generation wireless technology that promises data speeds of 100 Megabits a second and more (under ideal conditions).

An increasing number of countries are adding 4G networks, mainly using LTE (Long Term Evolution) technology. Not having had our 700 Mhz auction, Canadian carriers aren’t in a position yet to join them.

But who will be eligible to bid on that spectrum?

First, to encourage wireless competition, in the 2008 spectrum auction the government set aside spectrum that only new entrants or those with less than 10 per cent of the market could bid on. Nine newcomers won spectrum, four of whom have launched service (Wind Mobile, Mobilicity, Public Mobile and Videotron) and are starting to eat into the 94 per cent market share controlled by BCE Inc.’s Bell Mobility, Rogers Communications Inc. and Telus Corp.

Issues before any government include deciding whether the auction rules in 2008 should be the same for the next auction: Should there be a set-aside to protect the rookies, or let whoever has the most money win?

Some suggest Bell, Rogers and Telus have so much spectrum already their ability to buy new frequencies should be capped, a notion the three incumbents vigorously oppose.

Another reason to liberalize investment rules: Some of the new entrants, already burdened with paying for spectrum from the last auction and startup costs, need foreign investment if they want to play in the next one.

Second, those eligible to bid on spectrum have to convince Industry Canada that they comply with the Canadian control provisions under the Telecommunications Act. If the government wants to send a signal that increased foreign investment in telecommunications is welcome, the 700 Mhz auction is a great place to start by widening the ability of foreign investors or telecom companies to either bid themselves or partner with an existing Canadian carrier.

STATUS: The government is still accepting submissions from carriers on what the 700 Mhz auction rules should be. But the Conservatives first want to form their foreign telecom ownership policy.

That policy is arguably the hottest issue of the three. There are Canadians who are highly sensitive to foreign investment in this sector, for it touches on the ability to control the country’s culture.

On the other hand, the Conservatives argue they can find a way to separate ownership of transport networks from those that carry content. There’s a complicating factor: Industry analysts doubt many foreign carriers will be willing to invest much here unless they can exercise control, which raises the question of whether a government is willing to go that far.


With a minority government the Tories might not have been willing to go too far. Here’s the positions of the parties last June when the opposition tabled their responses in Parliament.  

No matter which party forms the next government, a date and rules for the 700 Mhz auction will have to be set. The world is quickly moving to 4G technologies and arguably that auction can’t be held later than 2013.

Whether any government will significantly change the rules on foreign ownership is another question.

As for a digital economy strategy, the government doesn’t face a deadline, unless the U.S. moves aggressively on one of its own.

Officials at two telecommunications companies said they aren’t worried the election causes a delay in these issues.

Foreign investment and the 700 Mhz auction weren’t going to be deal with in the next few months, said Jean Brazeau, senior vice-president of regulatory affairs at cable operator Shaw Communications. Michael Hennessy, SVP regulatory at Telus Corp., agreed.

As for the digital economic strategy, “I don’t think that was going anywhere at all,” said Brazeau.

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