Will federal digital strategy come out in pieces?

Several years ago when he was Industry Minister, Tony Clement vowed to bring out a national digital economy strategy because broadband is so essential to the future of modern nations.

But University of Ottawa Internet law professor Michael Geist suggested at a conference this week that promise may have been smoke and mirrors.

Geist told the annual ISP Summit this week he recently talked to someone “pretty senior” in the Harper government” who said “anytime you see us put forward a strategy it means we really don’t want to do anything at all.” The word “strategy” is code looking for like you’re doing something, Geist said he was told. Instead look at what government is actually doing.

By that measure the government does have a digital strategy, he said, pointing to separate telecom and broadcasting decisions that will “curry favour” with the public.

[He didn’t mention specific decisions, but some moves include refusing to allow Telus to buy Mobilicity, changing the foreign telecom ownership rules and structuring the upcoming 700 MHz spectrum auction to help small carriers and putting licence obligations on winners of 700 MHz spectrum to deploy wireless broadband in rural areas. There’s also Thursday’s promise by the government not to take back certain spectrum from carriers that don’t deploy it.]

The ISP Summit is staged by the Canadian Network Operators Consortium (CNOC), group of some 35 independent Internet providers. Geist was part of a panel on regulatory issues ISPs are likely to face in the coming years. One of them is a review by the Canadian Radio-television and Telecommunications Commission (CRTC) of its wholesale rate structure, which governs what services at what prices incumbent telecom and cable companies can sell to ISPs. ISPs in turn resell service to businesses and consumers.

But while the review is just under 12 months away panelists gave a preview of what ISPs and incumbents will argue, and how pointed they will be. Lawyer Chris Tacit, who has acted for CNOC and some ISPs, noted that the commission’s recent call for papers on the hearing said wholesale prices “are integral for successful retail competition and the efficient functioning of telecommunications networks.” From that he deduces the commission has already decided that that wholesale regulation in some form will continue.

However, panelist Jonathan Daniels, Bell Canada’s vice-president regulatory law, warned that the commission shouldn’t open up the wholesale regime to new fibre-optic to the home (FTTH) services operators like it are now rolling out to replace aging twisted copper infrastructure. FTTH lets operators like Bell and Telus offer ultra high speed Internet and services like IPTV. It differs from fibre to the neighborhood node (FTTN), which brings fibre optic to a neighborhood end point; from there, homes are connected by copper wire. Regulators justify opening the networks of incumbents to competitors because copper wires are legacy infrastructure that telcos had a monopoly on for decades.

But, Daniels said, FTTH is new infrastructure  — and, he added, not only is FTTH expensive,  Bell can’t build it until a customer asks for it.  That, he said, makes it a “risky investment.”

“How does that work in a wholesale world where there’s no risk associated from the ISP in terms of buying that service from the incumbents?” he asked.

But Tacit replied that “there is market power that incumbents exercise.” The fact is the fibre to the home is Bell’s, he said, so last mile access can be a bottleneck for ISPs. He acknowledged that Bell [TSX: BCE] has said it’s willing to negotiate access deals with ISPs, “but at the end of the day if you have an unwilling incumbent who will not deal and isn’t likely to make deals in the absence in the absence of some (wholesale) tariff backstop you’re going to need it to discipline that market power.”

Geist agreed, saying “often the incumbents where they have the power don’t move unless there’s regulation, or the threat of regulation.”

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Howard Solomon
Howard Solomon
Currently a freelance writer, I'm the former editor of ITWorldCanada.com and Computing Canada. An IT journalist since 1997, I've written for several of ITWC's sister publications including ITBusiness.ca and Computer Dealer News. Before that I was a staff reporter at the Calgary Herald and the Brampton (Ont.) Daily Times. I can be reached at hsolomon [@] soloreporter.com

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