The Canadian government has so badly mishandled opening up competition in the telecom sector that it’s now at risk of so badly damaging Canada’s reputation that even if they eventually do get around to lifting foreign ownership restrictions, companies may still be afraid to invest.
Naguib Sawiris, is the Egyptian billionaire who financed Wind Mobile on the premise that Canada was open to creating more competition in the telecom sector. When asked recently if he regreted his investment, he replied “Totally. I would actually, if they would give me my money back, minus 10 per cent, I would take it any day.”
In other words, Mr. Sawiris expects to take a major loss in Canada and if he could find a way to bail out with only 10% loss (approximately $100 million) he would.
But even more worrisome, Mr. Sawiris is not afraid to tell others investors to steer clear of Canada, “Anybody who asks me, I tell him, [...] Don’t come here”
From CNN Money: “Netflix’s first foray into international markets has been rough. Why? Blame Canada.”
Following a pattern that often repeats itself, when an old-media company is unable to innovate and compete on its own, it goes begging to the government for protection.
And so it is with Canada’s media and cable companies. With the end of the cable monopoly in sight, they are begging the CRTC to regulate over-the-top services.
These companies (Shaw, Bell, etc) control virtually every aspect of Canadian media delivery. Everything from the content itself all the way down to the physical wires and airwaves that beam the content to homes. Yet, they are so fat-and-happy with their position that even the mere thought that they might need to do something to compete sends them crying to the CRTC for relief.
Like the music industry before it, their demise can’t come soon enough.
A comparison of broadband caps and usage charges in various countries. The article has comments from a user in the Kingdom of Bahrain where users are subject to “ruinous” bandwidth caps. Elsewhere, the comparison shows that Canada’s caps are among the most restrictive.
The bottom line is simply this; high telecommunication costs reduce productivity and stifle innovation.
Feeling the heat from the consumer backlash, Bell has withdrawn it’s UBB application with the CRTC. This must certainly come as a relief to the CRTC which can now slip out the back door without having to conduct a public hearing into the proposal risking the ire of both the Conservative Government and the public.
One interesting detail from the proposal is that the wholesale rate for data transfer is 19.5 cents per gigabyte. This confirms statements by critics such as Netflix that data caps on home internet users are there to prevent competition.
“Netflix says Canadian Internet providers are using data caps to inflate their profits, not provide better service.” From CTV.
According to a complaint filed with the CRTC, Rogers has implemented traffic throttling on it’s network which is so primitive it can’t distinguish between World of Warcraft and Peer-2-peer traffic. If it can’t tell the difference between WoW and P2P, then what else is it accidentally being caught in it’s traffic shaping?
Where is the transparency that the CRTC ordered the IPSs provide in exchange for allowing throttling in the first place?
If the CRTC was a real regulatory body then they would have ordered Rogers to immediately fix the filters, or remove them. But no, that’s not the way it works. The CRTC just pats the consumer on the head and tells them to run along. And after sharing a good laugh and a round of high-fives with Rogers over having successfully thwarted another petty complaint, they put their feet back up on the desk.
This is an interesting turn of events considering the courts recently over-ruled the Conservative Governments decision to over-rule the CRTC and let Wind operate in Canada despite not meeting the foreign ownership rules. $6 Billion is a lot to pay for a small wireless company that may have to close.
Obviously VimpelCom doesn’t think that’s very likely. Either that or it figures the spectrum assets are valuable enough that it can sell them at a profit.
As the next big Canadian wireless spectrum auction draws near, the wireless companies are squabbling over who should be allowed to bid.
Regardless of how the auction is done it will be just another example of short term gain for long term pain and a tragedy for Canadian tax payers.
The auction process fails consumers because no matter what price companies pay up-front for spectrum, it get sold back to Canadians at a rate many times higher than the original purchase price. The higher the cost, the less likely the purchaser will be able to offer competitive cell phone plans and with so much money tied up in the initial spectrum purchase, new entrants will only be able to offer service in the most densely populated areas.
In short, the auction process promotes high prices and poor coverage.
Far from promoting competition in the wireless industry, spectrum auctions favor incumbents even when they aren’t allowed to bid by driving up spectrum costs and thereby constraining the new entrant’s ability to compete. The multi-billion dollar cheque the government gets from the sale of the spectrum pales in comparison to the long term cost to consumers.
Any way you slice it it equals a massive net loss for Canadians.
A better option? How about a reverse auction? Why don’t we give the spectrum (yes for free!) to the bidder who commits to massive, Canada-wide coverage and to selling the spectrum back to Canadians at the lowest price? To ensure that Canadians continue to get the best prices, the spectrum license would have to be renewed every 5 years.
The beauty of this plan is that it doesn’t require any restrictions on who can bid. Regardless of whether or not it’s a new entrant or an incumbent, Canadians are guaranteed the lowest price.
Of course it’s a dream. There is no way that Tony Clement will be able to resist the big payday the auction will bring. Like most governments, they will choose short term gain despite the long term pain.