Each year Canada’s leaders in telecommunications gather at the Canadian Telecommunications Summit to talk about ongoing policy issues, articulate their concerns about Canada’s status in the world of telecommunications, and share lessons and experiences with one another. This years Summit was no exception. While some commentators have accused this year’s event of just rehashing previous years’ content – it is true that each Summit does see similar topics on the conference agenda, with common positions taken each year – there are some interesting points that emerged this year.
Specifically, discussions about the valuation of telecom services regularly arose, discussions of supply and demand in the Canadian ISP space, as well as some interesting tidbits about the CRTC. For many people in the industry what I’ll be talking about isn’t exactly new; those not inside the industry’s fold, however, may find elements of this interesting. After outlining some of the discussions that took place I will point to something that was particularly striking throughout the Summit events I attended: Open Media loomed like a spectre throughout, shaping many of the discussions and talking points despite not having a single formal representative in attendance.
Throughout the Summit speakers regaled the audience with just how much Canadians take advantage of the Internet; we are the most prolific users of YouTube, heavy users of Facebook, and are online for longer periods of time than many other countries’ citizens. Thus, from the telecommunications perspective, current pricing models and bandwidth allowance conditions are set so that consumers still enjoy high value from their services. Interestingly, while Canadians my be online for greater periods of time Europeans are actually consuming twice as much bandwidth as North Americans. To clarify, customer value propositions almost uniformly adhere to the following equation:
Value to customers = Benefits received by customers – cost of service/good
Given that prices for broadband are typically lower in Europe, and that members of the EU are even more prolific users of broadband (presumably also receiving at least equal benefits as Canadians) it would seem that the value to consumers provided by European carriers is actually higher than that provided to Canadians.
During the Summit, ISPs were informed by policy management vendors that the complementary products that compose a significant facet of ISPs’ revenue streams are in danger. Sandvine’s President and CEO, Dave Caputo, pointed to a report from Barclay’s capital equity research that found voice traffic was presently worth about 10,000 Euro/GB of traffic, text messages about 30,000 Euro/GB, and pure data transmissions only about 5 Euro/GB. Further, Mark Henderson (President and CEO of Ericsson Canada Inc.) asserted in his keynote that voice traffic was effectively noise on mobile networks on the basis that voice traffic accounts for almost single digital percentages of overall data transmissions. As a result, voice services are decreasingly seen as effective profit centers. Taken together, it would appear that the value proposition of offering all you can eat broadband services is diminishing from a carrier perspective whilst consumer value propositions from such models continue to increase as Internet experiences become richer and richer.
More generally, with the introduction of more and more services that are designed to use data, and that let people cut SMS and voice plans, core mobile profit centres are threatened. Of course, such centers are perhaps enhanced whenever customers exceed their data plans and receive incredibly high bills that price bandwidth capacity usesignificantly above the ‘bucket’ cost of data. While the ‘overage market’ might be seen as a potential site of revenue growth, carriers and vendors alike suggested that differentiated service offerings are a preferred means of enhancing customer value propositions. Generally, the argument was that customers want the experience of regular and predicable billing, and that the potential of overage charges are a limiting factor in driving data usage. In a differentiated service model customers might choose particular kinds of data-based services; perhaps they receive email and access to social networking sites but lack access to the web generally, or have to pay a certain amount to receive ‘so much’ web access over the course of a month. What remains unclear to me is that:
- Users actually want a differentiated offering. Instead, they seem to want to avoid bill shock. Differentiated billing is not the solution to the problem facing consumers, though effective policy controls that stem the ability of users to massively exceed their monthly data caps would (in part) resolve the ‘pain point’ felt by consumers. Further, where overages occur prices should be fair; there is no clear reason why someone that uses an extra few gig of mobile data should have to mortgage their home to pay off a monthly cellular bill.
- Service differentiation necessarily reduces the amount of bandwidth that users will consume. While this may be the case sometimes it seems as though the emphasis should be on data usage instead of service usage. In a ‘Facebook package’ can individuals click the links associated with people’s Walls? Watch embedded videos? Upload an infinite number of photos? If not, then are individuals receiving a ‘Facebook’ experience where that experience is dependent on the socialized nature of sharing and access to the greater web? Is someone who uploads hundreds or thousands of photos to Facebook a less prolific user of data as compared to someone who checks a few emails and browses the web a little bit every day?
This isn’t to say that I don’t understand carriers’ fear of the Over-the-Top services that are slamming their complementary products. At peaks times of the day Netflix is currently accounting for around 29-30% of all data traffic in North America, and accounts for 13.5% of Canadian traffic during peak periods. The rise of high-quality on-demand OTT content also changes the language of carriers: legitimate customers who are accessing well integrated and easy to use OTT services are driving growth, not ‘content thieves’. No longer are carriers’ portals competing with infringing content but legitimate content, and while carriers were quick to tout the ‘large’ number of online offerings they have through their portals what struck me was that in at least the case of Videotron I personally have more legitimate content on my home NAS than their company makes available to their consumer base. This is not the case when contrasting my personally stored media content against that of Netflix’s library! I recognize that part of the problem facing carriers today relates to rights clearing, but given just how vertically integrated many of the largest carriers are I cannot see consumers genuinely sympathizing with their ISPs and television providers. Instead, customers are ‘enjoying’ low data caps that punish excessive enjoyment of OTT, non-carrier provided, content: the pain point around costs of bandwidth capacity provision are driven by carrier scarcity of legitimate online content combined with high overage costs, not with ‘data hogs’ that are violating social norms by watching their movies and TV from the Internet.
Supply vs. Demand and Spectrum Framing
Throughout the Summit, attendees (and members of the various government regulatory bodies) heard that ‘supply isn’t the problem, demand is!’ In effect, Canada’s telecommunications companies were stating that they are meeting the expectations of Canadians and that the companies would continue to meet expectations in the future. Consumers themselves were seen as the problem in the supply/demand curve of Canadian telecommunications. Specifically, carriers can move large capacities of traffic but there are many Canadians that cannot access even basic computer services. Without access to computers, combined with high levels of literacy, consumers cannot understand the benefit of broadband.
Mark Goldberg, one of the two primary organizers of the Summit, began his address on the first day with this point and it was reiterated throughout the event. Interestingly, Rob Bruce (President of Rogers Communications) recognized that his company had to do a better job in making access to devices, and their daily use, a simpler experience. He also recognized that Canadians needed to be able to control their ‘digital consumption’. While on the one hand I agree with this sentiment (because of the horrendously high overage fees potentially facing mobile and wireline consumers of Canadian providers) I worry that this is really an indirect way of asserting that managed networks and differentiated access types to the Internet are ‘needed’ by today’s consumers. Further, if such a managed and differentiated product offering is required to avoid high overage fees and afford some sense of monthly financial security, then one has to wonder how effectively the ‘supply’ side of the supply/demand equation is really being handled. Managing resources to maximize return on supply is not the same thing as establishing a healthy supply/demand equilibrium that conforms to basic economic theory and free market expectations.
If supply truly is meeting demand today (a questionable position based on carriers’ stated needs to throttle traffic throughout the day and charge grossly highly overage fees for bandwidth capacity use) then we might wonder about the regularized scare tactics surrounding Long Term Evolution (LTE) deployment in Canada. Access to the 700 MHz spectrum was a regular point of contention throughout the Summit, with carriers insisting that next-generation Internet services were dependent on each carrier receiving a large amount of that spectrum block. Discussions over wireless spectrum saw some ISPs advocate for entirely open auctions that avoid set-asides for new(er) entrants and others demanding spectrum set-asides or offering their own policy models that favor new(er) carriers.
For those not invested in the spectrum debates, the 700 MHz block is presently used for analogue television and is soon to be auctioned off once all television in Canada has migrated to digital systems. This particular block of spectrum is terrific at travelling long distances and passing through structures and other physical objects. Large carriers assert that delivering high-speed broadband to rural and remote locations will prominently require LTE technologies. Further, these same carriers threaten that LTE systems will be experience delayed deployments (or not be deployed at all) if they are not given access to the 700 MHz spectrum block. A critical observer might wonder whether those companies’ shareholders will stand for the executive and board simply refusing to keep updating systems with the times, perhaps using non-beachfront spectrum, if not upgrading will reduce shareholder returns. The same observer might also wonder at just how often the larger providers have actually carried through with such threats of non-investment.
More generally, the efforts to frame the upcoming spectrum auctions were fast and furious, with each large company getting time on stage to talk to an audience composed of other telecommunications providers, regulators, media, and a precious few academics and students. The regulatory staff that I spoke to were all aware of the framing process – some found it moderately amusing – but it’s important to note not just what was said and who said it, but what wasn’t said and who didn’t have a chance to speak. Specifically, the strong positions taken by groups such as CIPPIC and Open Media over the past few years in public and regulatory spaces were not articulated by members of those groups, nor were they given between a half-hour or an hour of stage time. More carefully stated, a framing process entails groups identifying a problem, groups responsible for it, and policy solutions to correct it. For all parties to have an equal handle in trying to shape the agenda, all must be permitted to proceed through the framing process during moments where the elites of the policy subsystem meets. Unsurprising, given the highly corporatized nature of the Summit, members of advocacy groups and coalitions were not invited to speak and have a shake at shaping Canada’s telecommunications regulatory agenda.
This isn’t to say, of course, that advocacy voices were entirely silent: John Lawford from PIAC spoke, as did Commissioner Stoddart. Neither focused on spectrum, but instead of specific harms experienced by Canadians. Their contributions operated within the conservative nature of the telecommunications subpolicy group, insofar as they slightly expand the scope of discourse without significantly throwing off or challenging ISPs’ cohesive framing (and exclusion/denigration) efforts.
Throughout the Summit there was a regular emphasis on disdain towards advocacy groups that had garnered significant attention from the media and Canadians more generally: Open Media’s recent report was referred to as “an homage to state sponsored network neutrality and broadband” by TELUS’ VP Regulatory, the organization was accused of taking advantage of social media and undermining its value as a source of information by Rogers’ President of Communications and the group is apparently obscuring network realities as far as Videotron’s President and CEO is concerned. The regulator also got involved, when the Chairman of the CRTC asserted that the consumer groups generally had to get organized and expand their knowledge.
This kind of broad framing – of extinguishing the legitimacy of a large voice without letting it speak – indicates a pair of things;
- Open Media has been incredibly successful in getting under telecommunications providers’ skins. I’ve never been at a Summit (or other large industry event, of any kind) where an advocacy group and its coalition has attracted so much explicit and implicit vitriol;
- Some companies are now ‘framing’ the group’s crowd-source effects as illegitimate and thus trying to illegitimate other attempts to crowd-source information.
I don’t expect, nor am I suggesting, that framing entirely obfuscates or undermines the conditions of Open Media’s attempts to work in the telecommunications regulatory space, but it does work to identify ‘qualified’ epistemic elites by whom telecommunications should be handled. The long-term consequences of depriving this advocacy group a voice at the Summit is to simultaneously reaffirm the legitimacy of actors that are present and harden combative language amongst the various members, as well as confirm that Open Media is a recognized adversary in Canada’s telecom space. This isn’t to suggest that providers have some kind of a ‘battle plan’ – there isn’t a central organizer that is using this space to intentionally coordinate language – but rather the result of a closed communications loops that constitute an ‘iron triangle’. Such triangles are composed of closed and mutually supportive groups that see governmental agencies, special interest lobbying groups, and legislative (sub)committees working together to develop policy. Members of such groups are typically specialized in very particular policy areas and present a united front towards interlopers or outsiders who
attempt to invade their turf and alter established policies that have been worked out by years of private negotiations among the “insiders” … These triangles are said to be as “strong as iron” in that these mutually supportive relationships are often so politically powerful that representatives of the more general interests of society are usually effectively prevented from “interfering” with policy-making altogether whenever their concept of the general interest runs counter to the special interests of the entrenched interest groups, bureaucrats and politicians (Source).
The CRTC in Focus
The Chairman of the CRTC was at this year’s Summit, and as usual interesting little tidbits came out in his discussion with Summit co-organizer, Mark Goldberg. von Finckenstein was regularly asked questions that followed Open Media’s general talking points, including questions of structural separation, roles of consumer groups, and effectiveness of existing CRTC regulatory policies. During the questions the Chairman was asked about the CRTC’s research capacity: in effect, is the regulator conducting in-depth research of goings on around the world, or is it predominantly relying on what is provided to it by those coming before the regulator? While I had expected that the CRTC was stacked with some research analysts who conduct research, von Finckenstein instead said that while the CRTC has a good handle on ‘the basics’ it isn’t actually engaged in detailed research of any particular regulatory approach to telecommunications. His rationale was that if the Commission was involved in intense research then it would come to particular proceedings with biases that might limit their position as impartial regulators. While I can appreciate the sentiment here, it seems somewhat off-base: as a scholar I expect that when I submit a piece for peer-review that it will be treated fairly and as neutrally as possible. This said, expect that reviewers will have conducted research in similar topic areas and that they will have private opinions concerning the argument-types presenting. I fail to understand why the CRTC cannot conduct basic research to evaluate the claims made by carriers and consumer groups alike, balancing any claims against existing policy research and analyses that are both conducted in house and by other regulators/academics.
Somewhat distressingly, the Chairman asserted a point that those who have spent time watching the CRTC already knew: the CRTC is of the opinion that consumer groups should be driving complaints before the CRTC instead of consumers themselves. von Finckenstein maintains that the highly technical nature of filing complaints means that the process is ill-suited to average consumers and that, as a result, consumers need to organize and develop a broader knowledge base concerning telecommunications so that they can then file complaints as appropriate. This having been said, he also asserted that consumers don’t generally have problems communicating with the CRTC. While unstated, I suspect that this particular comment was meant to capture the individuals consumers who are filing ITMP complaints with the CRTC, though doubt that he appreciates the level of consumer resentment towards the CRTC’s apparently toothless enforcement of their own regulatory decision around traffic management policies in Canada. I also find it of concern that the Chairman focuses on consumer groups as chiefly responsible for the formal complaints: for the full range of consumer issues to be brought before the CRTC there must be enhanced funding for these very groups. Canada is not the US, it doesn’t have the support of private foundations that enable civil society to work in the favor of citizens and consumers. Ideally, if the Chairman were serious about his suggestion, he would also demand that additional funds be provided to consumer groups prior to filing a claim so that research and testing could be performed ahead of time. As the ITMP proceeding demonstrated, the costs associated with significant hearings are so high that few can afford to do the work and simply hope to get paid at the conclusion of a particular regulatory procedure.
Unsurprisingly, the Commissioner also asserted that ITMP audits were not something that CRTC was interested in conducting because any such practice would operate under the assumption that there might be something wrong in the first place. As a complaints-driven body it would be inappropriate to make such an assumption. This is unfortunate because it can be so challenging for individuals to actually trace the source of network-based problems. Further, it is in companies’ best interests to keep a shroud drawn tightly around themselves and their infrastructure operations to obfuscate their own misdeeds. Indeed, this very point has been made repeatedly by scholars in the telecommunications sphere but without a research wing it would appear that the CRTC is ignorant of the basic facts of corporate strategies that are designed to confuse consumers. Further, without such a research wing the Commission is apparently unaware that those conducting research on the outskirts of the network infrastructure will almost certainly have a very difficult, if not impossible, time trying to identify problems that reside within ISPs’ infrastructure.
The Haunting of Open Media
Open Media hung over most of the Summit as a spectre that could-not-be-named. Various CEOs, Presidents, and Vice-Presidents raised concerns over the role of advocacy groups. Rogers’ President of Communications worried that ‘special interests’ were undermining the value of social media as a source of fact-finding and outreach, Videotron’s President and CEO asserted that customers were happy with Usage Based Billing and that Open Media was just trying to obscure network realities and the Chairman of the CRTC maintained that a series of Open Media’s key issues (audits of ITMP systems, functional separation) were not issues that the regulator was willing to take up. TELUS’s Mike Hennessy stated (without defending the claim) that Open Media’s recent report, “Casting an Open Net: A Leading-Edge Approach to Canada’s Digital Future,” was homage to state-sponsored network neutrality and broadband. Further, it was suggested that Open Media should have been the consumer group that was present at the annual ‘Regulatory Blockbuster’ panel instead of PIAC, based on each consumer groups’ relative prominence in the broadband space this past year. It is admittedly somewhat anecdotal, but a vast number of the conversations that I participated in over the two days I attended the Summit saw Open Media either directly or indirectly come up.
What does this mean for Open Media as an organization? To begin, it indicates that the organization is implicitly recognized as an actor in the Canadian telecommunications policy subsystem, as demonstrated both by their involvement in discussing policy issues and bargaining in pursuit of their interests, as well as by the agenda denial tactics that are being undertaken by incumbent subsystem actors. The group’s effectiveness is arguably tied to their ability to harness epistemic elites that are not typically associated with regulatory proceedings and while simultaneously forging alliances with established actors. Further, Open Media has a demonstrated an ability to capture public attention and focus government awareness on issues in a manner that simultaneously aligns and opens policy windows. As a result of their focusing efforts, the group have effected changes to the regulatory agendas.
The capturing of public attention is key to their status as members of this particular policy sub-community: while they present policy alternatives they have also leveraged the potential votes of their backers and thus seen political parties seek Open Media’s favor. As a result of their capacity to capture and harness public attention, Open Media is challenging existing policy monopolies by becoming a dark horse that frames problems differently than Canada’s dominant carriers and that demands solutions often diverging from carriers’. Despite this divergent framing and solution set, the organization has often attempted to link their own issue set with the government’s economic principles and objectives, defending their position by appealing to key regulatory directives and frameworks. This insulates some of their work from overt assault. In effect, Open Media is working to alter “policy images through a number of tactics related to altering the venue of policy debate” and is consequently undermining “the complacency or stability of an existing policy subsystem” (Howlett and Ramesh 2003: 139).
The organization’s actual impact in the formation of policy itself – decision, implementation, and auditing policy stages that follow agenda shaping – is less clear. Along with other sub-system actors, such as Jean-François Mezei, Open Media has successfully rebuffed at least one major policy initiative that was decided by the CRTC around UBB. The development of alternate policy principles and guidelines may assist in promoting their issue-set but the rate of seeing their suggestions introduced into regulatory policy will be delayed based on the complexity of the policy subsystem they are operating in. Further complicating their efforts are the constraints placed upon the regulators who are expected to make, implement, and regulate telecommunications policy. Consequently, incrementalist changes are most likely. Incrementalism does not necessarily mean that Open Media’s own policy initiatives and principles are transformed into policy, but that existing policy actors’ traditional principles, aims, and policy preferences may not be codified as rapidly as in the past. Further, traditional actors may need to modify their narrative and either incorporate some of Open Media’s language to hedge out the advocacy group or reorient their discourse to more effectively isolate and exclude Open Media as a legitimate policy actor. Regardless, for the moment at least Open Media has successfully intruded on a (relatively) monopolized policy subsystem and is affecting change, though it will be an uphill battle to establish themselves as a long-term member in Canada’s telecommunications policy network.
M. Howlett and M. Ramesh. (2003). Studying Public Policy: Policy Cycles and Policy Subsystems (Second Edition). Toronto: Oxford University Press.