Tuesday, August 16, 2005

Canadian Telecom Policy Review - For Whom The Bell Tolls

Yesterday, Bell Canada issued its press release on their view of how telecom policy should unfold going forward.

Only in Canada can an incumbent put forward such a detailed, comprehensive proposal about how things should be done to modernize telecom rules and regs! The full submission weighs in at an astounding 1000 pages, and the summary alone is 64 pages. I don't know about you, but that's not a document I'm in any hurry to get into. That's what the lawyers are paid for, right?

To be fair, Telus - our other major incumbent - is of the same view, but they're not making nearly as much noise about it. This is understandable given that Telus is embroiled in a messy headline-grabbing labor dispute - mainly in its home turf in Western Canada - and can't devote as much bandwidth to matters in far-away Ottawa. So, this isn't entirely a Bell undertaking - but it sure looks that way.

True to form, Bell made sure the word was heard today during a 2 hour presentation here in Toronto, led by their uber regulatory advocate, Lawson Hunter. You have to give credit where credit is due - Bell does a great job of creating an accessible forum to hear their story, and engage the analyst community in dialog.

I'll leave it to the regulatory experts to dive deep into what this all means, but here are the key takeaways for me.

First, as per an earlier posting, this initiative strikes me as an end run around the CRTC. Bell is masterful at this, and is proactively trying to change the frame of reference by making telecom an issue about policy rather than the regs to enforce it. So, they're taking it to a higher plane of being strategic instead of tactical. To impart some local flavor, this is akin to the gay marriage debate. I believe the main reason why Canada now supports gay marriage is that those on the pro side were able to re-frame the issue from one of morality to one of legality. You can't legislate morality, but once gay marriage fell into the legal realm, the battle was over. In this context, the issue was reduced to a simple matter of human rights, something which Canada enshrines to an absurd degree. Game, set, match. Enough on that - back to Bell...

1. To make telecom a strategic issue, Bell has based their submission on the "productivity gap" argument, maintaining that we're falling further behind our G7 colleagues because we don't invest enough in information and communications technologies (ICT). There's definitely some credence to this, and they've backed it up with references to all kinds of studies quantifying our shortcomings. So, once you get the Federal government to buy into this, the scope broadens well beyond telecom and it then becomes an issue of economic policy. In Bell's view, ICT would become nothing less than a "national priority", under the direct leadership of the Prime Minister. The CRTC might as well pack up and go home.

2. Not only should ICT become a "national priority", but the government - oops, taxpayers - would be leading the charge to invest in ICT. Government, health care and education - all with but a few exceptions are 100% publicly-funded - are among our largest employers. What better place to start to whittle down the "productivity gap"? No doubt, the spirit of the message is noble - stimulate R&D in ICT, and putting our public institutions at the leading edge of efficiency. What forward-thinking government wouldn't want that?

Not only that, but they'll also be handing out generous tax credits and write-offs to suppport private sector ICT investment.

Don't get me wrong - it would be great to see all this happen. Just strikes me that our government is doing all the heavy lifting here. And Bell leads the way with all the wonderful technology and solutions to restore us to our rightful place as high tech world beaters. After all, it's their vision. And a good one at that - so long as there's room for everyone.

3. A regulatory framework driven by the magic of "market forces" instead of the need to ensure competition and choice for consumers. In this world, regulators would be reduced to policemen, merely monitoring and adjudicating misuses of market power. The CRTC would no longer make the rules - they'd just enforce them. And of course, looking after those lofty social issues like ensuring access of services to the disabled. Or taking care of messy things like interconnection. Bell is advocating that the big picture stuff be handled where it belongs - authorities like the Commissioner of Competition, and the Competition Tribunal, according to the Backgrounder brief they prepared.

4. These issues are simply too big for the CRTC now. Bell wants an "integrated" approach to telecom, with "consistent" rules for all the players. In principal, they are totally correct. We do need an overhaul of things here. Bell has carefully outlined its 7 "guidelines" for achieving this - all we have to do is sign on the dotted line and our troubles will be over. These guidelines all merit discussion, but not here. I just wanted to say they address the various shortcomings that all the incumbents saw in the May 12 ruling, and it's perfectly understandable from their point of view. The cablecos, of course, won't agree, and that's another conversation. Something tells me this story still has a few chapters to be written.

5. Finally, for the coup de grace, Bell has to show that the world is on their side. They went to great lengths to cite findings from a recent study showing that most consumers believe they have "adequate choice" for local phone service. Bell's argument for most of these issues is based on the premise that their market power is not absolute, and does not by default transfer to the VoIP world. So, research like this is a key benchmark to validate their position.

Not only that, but they also pointed out that consumer perceptions about choice are far more favorable for local phone service - 66% - than for cable service - 38%. Did I hear Ted Rogers say ouch? If I was Bell and had this data, I'd be using it this way too. After all, fair is fair, and we have to compete with whatever tools are available.

The saga no doubt will continue...

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