Committees / News

Canada’s Telecom Crisis: My Appearance Before the Senate Transport and Communications Committee

Two weeks ago, I appeared before the Standing Committee on Transport and Communications to discuss the state of telecommunications in Canada.  The committee is conducting a study on the wireless sector and access to high-speed Internet.  The full hearing last over 90 minutes and the transcript has just been posted online.  My opening statement is posted below.

Appearance before the Senate Standing Committee on Transport and Communications
May 26, 2009

Good morning.  My name is Michael Geist.  I am a law professor at the University of Ottawa, Faculty of Law, where I hold the Canada Research Chair in Internet and E-commerce Law.  I am also a syndicated weekly columnist on law and technology issues for the Toronto Star and the Ottawa Citizen.  I served on National Task Force on Spam struck by the Minister of Industry in 2004 and on the board of directors of the Canadian Internet Registration Authority, which manages the dot-ca domain name space, from 2000 – 2006.

I appear before the committee today in a personal capacity representing only my own views.  I grateful both for the opportunity to appear before you and for your decision to address this issue.  As you know, Canada was once a global leader in the telecom field.  Companies like Nortel led the world and – befitting a country with our geography – Canada consistently ranked toward the top on most telecom measures. No longer.  While RIM has carved out an important niche and become a household name, the Canadian telecommunications scene is in a state of crisis.  This is no exaggeration.  Following years of neglect by successive governments, the absence of a forward-looking digital agenda, and cozy, uncompetitive environment, we now find ourselves steadily slipping in the rankings just as these issues gain even more importance for commercial, educational, and community purposes.

I know that you are focused primarily on the wireless sector, but I think the problems within our telecommunications infrastructure are not so easily divisible.  I would like to briefly discuss three issues – wireless, broadband access, and net neutrality.

Wireless

The promise of an always-on mobile Internet – delivered through cellphones and wireless devices – has long been touted as the next stage in the evolution of electronic communication and commerce. That next stage is a reality in many countries, yet Canada finds itself rapidly falling behind even developing countries as a consequence of overpriced mobile data services.

Canadian carriers have until recently treated mobile Internet use as a business product, establishing pricing plans that force most consumers to frugally conserve their time online.  Indeed, the mobile Internet in Canada is reminiscent of Internet access in the mid-1990s, when dial-up access dominated the market and consumers paid by the minute for their time online.

The evidence is everywhere.  Last year, the World Economic Forum pointed to problems in the wireless market as a key reason for Canada’s slipping global ranking for “network readiness” (Canada has moved from 6th worldwide in 2005 to 13th today).  Canada ranked 75th in the number of mobile subscribers, trailing countries such as El Salvador, Kazahkstan, and Libya.  It also lagged behind countries such as the United Kingdom, Singapore, Italy, Sweden, and Norway on mobile pricing.

RIM has expressed frustration with Canadian pricing, predicting that carriers could sell “eight or nine times” more Blackberries if they lowered data prices to levels found elsewhere.   Reduced sales are only part of the story.  High data prices mean Canadians use the mobile Internet less than people in other countries, which Google has noted leads to lower Canadian usage of web-based email or online mapping services from wireless devices.

The new entrants into the marketplace may help, but they appear to be targeting the lower-end of the marketplace, precisely where Canada’s pricing compares favourably with some other countries.  Indeed, it is the medium and particularly the higher end users that face significantly higher pricing than in other countries.

So what can be done?

Last year’s spectrum auction opens the door to more competition, but it should be viewed as the start of addressing the wireless crisis, not the entire solution.  Other possibilities include:

  1. More spectrum.  The 700 Mhz offers an important opportunity for yet more competition.
  2. Open spectrum – the next auction could include mandatory open access requirements that allow carriers, device manufacturers, and service providers to use Canada as the sandbox for mobile innovation.
  3. White spaces – In addition to the auctioned spectrum, there is the potential for further unused spectrum to be made available for public use.  Known as “white spaces”, this spectrum was previously used by broadcasters to ensure that their analog broadcasts did not interfere with one another.
  4. Foreign investment – The emphasis on openness could also extend to telecommunications ownership where the current foreign ownership restrictions may artificially limit Canadian competition.
  5. Remove consumer barriers – Restrictive long-term contracts and the possibility of copyright legislation that could prohibit consumers from unlocking their cell phones make it harder for consumers to move between providers.  Other countries place caps on long-term contracts, caps on overpriced roaming charges, and reject legislation that stops consumers from unlocking their phones.
  6. CRTC – The CRTC is committed to a de-regulatory approach and has for years largely left the mobile marketplace alone (with the exception of undue preferences and unjust discrimination), yet the regulatory hole has not served Canadians well.  The CRTC may need to revisit the sector.

Broadband Access

We all increasingly recognize the critical importance of high-speed or broadband access.  Whether for communication, commerce, creativity, culture, education, health, or access to knowledge, broadband access represents the basic price of admission.  Canada was once a leader in this area.  In the late 1990s, we became the first country in the world to ensure that every school from coast to coast to coast was connected to the Internet.  Soon after, we launched a broadband task force committed to developing a strategy to ensure that all Canadians had access to high-speed networks.

In the years since that task force, Canada’s global standing has steadily declined.  Many European countries have eclipsed Canada in its broadband rankings.  The Telecommunications Policy Review Panel undertook a detailed analysis of the Canadian marketplace with the goal of identifying whether the market could be relied upon to ensure that all Canadians have broadband access.  Their conclusion was that it would not.  The panel concluded that at least five percent of Canadians – hundreds of thousands of our fellow citizens – will be without broadband access without public involvement.

Last week, the OECD released its latest report on global broadband and the results should be mandatory reading for anyone concerned with these issues.  Canada ranked ninth out of the 30 OECD countries on broadband penetration.  That isn’t great, but the situation becomes even worse once you delve into the details on pricing and speed.

First, Canada is relatively expensive, ranking 14th for monthly subscription costs at $45.65.  By comparison, Japan comes in at $30.46 and the UK at $30.63,

Second, the Canadian Internet is slow, ranking 24th out of the 30 countries. It is truly a different Internet experience for people in Japan, Korea, and France, where the speed allows for applications and opportunities that we don’t have.  Moreover, Canada lags behind in fibre connections with 0% penetration.  Japan sits at 48%, Korea at 43%, and Sweden at 20%.  Even the U.S. is at 4%.

Third, when you combine these two – price and speed – Canada drops to 28th out of 30 countries for price per megabyte.  In other words, we pay more for less than consumers in almost any other country in the OECD.

Fourth, Canada is one of only four countries where consumers have no alternative but to take a service with bit caps.  Almost all other OECD countries have more choice.

What can be done?

  1. Firm commitment to universal broadband access.  It is the price of admission for much that the Internet has to offer for education, commerce, communication, and community.  All Canadians should have access to reliable, high speed networks.
  2. Strategy for faster networks.  This may mean more competition, market-based incentives, and potentially community networks.

Net Neutrality

Network neutrality has generated an increasing amount of attention in recent months. While the definition of net neutrality is open to some debate, at the core is the commitment to ensuring that Internet service providers treat all content and applications equally with no privileges, degrading of service or prioritization based on the content’s source, ownership or destination.

Several concerns are often raised in the context of net neutrality.  The first is the fear of a two-tier Internet.  As providers build faster networks, there is reason to believe that they will seek additional compensation to place content on the “fast lane” and leave those unwilling to pay consigned to the slow lane.  While consumers already pay different prices for different speeds, imagine a world in which Chapters cannot compete in the online book space because its content is on the slow lane while Amazon is on the fast lane.  Consider an Internet where U.S. television shows and movie productions zip quickly to consumers computers because U.S. studios have paid for the fast lane, while Canadian and user generated content creeps along in the slow lane.  Or think about an environment where two-tier health care is replicated online such that only some health care providers have their content run on the fast lane.

This vision of the Internet is one that may become a reality.  In the U.S., major telecommunications companies such as Verizon and BellSouth have talked about just this sort of activity.  In Canada, Videotron has publicly mused about the potential for a new tariff for the carriage of content.

The second concern is that ISPs will block or degrade access to content or applications they don’t like, often for competitive reasons.  In the U.S., one ISP, Madison River, blocked access to competing Internet telephony services.  In Canada:

  • Telus blocked access to a union supporting websites during a labour dispute, blocking more than 600 other sites in the process
  • Shaw advertised a $10 premium surcharge for customers using Internet telephony services opening the door to creating a competitive advantage over third party services
  • Rogers currently degrades the performance of certain applications such as BitTorrent, widely used by software developers and independent film makers to distribute their work
  • Bell openly throttles BitTorrent traffic, a practice that has been challenged before the CRTC

In response to these concerns, there has been growing momentum for net neutrality legislation.  The provisions would require ISPs to treat Internet content and applications in a neutral fashion so that the opportunities afforded to today’s Internet success stories such as Google, Amazon, and eBay will be granted to the next generation of Internet companies along with the millions who contribute content online.

Note that the net neutrality legislation concerns have grown due to at least two problems in the Canadian market.  The first is the lack of competition – Canadian consumers have limited choice for broadband, typically limited to cable or DSL, or neither.  A viable third provider running their own network rarely exists. Markets with greater competition face less concerns about net neutrality since consumers can always make alternate choices.  The second is the lack of transparency – when Rogers or Bell degrades the performance of some applications, they rarely disclose these practices.  In contrast, some ISPs in other countries transparently identify how they treat all forms of content and applications.

Finally on the net neutrality issue, the CRTC will conduct hearings on the issue this summer.  That is a welcome development, but the government must stand ready to act – as other governments around the world are – should the regulator conclude the current law is unable to address net neutrality concerns.

Note that all these issues are connected.  They reflect a Canadian telecommunications environment that is in crisis, lacking in competition and gradually declining in comparison with peer countries around the world.  I welcome your questions.

26 Comments

  1. Well Done Sir!
    Thanks for your tireless efforts Michael.

  2. A real Canadian Hero!
    Now let’s hope this does not fall on deaf ears.

  3. Maebnoom says:

    Bravo!
    Very well said. All they need to do now is act on your points, because you nailed it. (once again)

    Not sure if I should start holding my breath, though…

  4. Great testimony…
    I think if Canada didn’t have Michael Geist we’d wither away and become Uganda over time.

    Why is the rest of Canada so clueless to the importance of this problem?

    Its simple:

    1) Agricultural age = agriculture & crops & land important
    2) Industrial age = factories and transport of goods important
    3) Information age = ??? Geee maybe internet?

    So how would these go:

    1) Restrict Land = Restrict agriculture = fail at agricultural age
    2) Restrict Roads & movement of goods = fail at industrial age
    3) Restrict Internet = ???

  5. Discussion was even better…
    I found the transcribed discussion between Prof. Geist and the Senators to be even more illuminating than the above prepared statement. Most of them actually seemed to be able to apply the subject at hand to their daily lives, and see how it could actually affect consumers and citizens. Great job!

  6. they just don’t understand the internet
    we need to teach these politicians and our greedy telcos a thing or two. this is so well spoken and is a heroic move, i hope they listen and we see investments and improvements in our communications infrastructure and pricing system.

  7. Maebnoom says:

    @ Jason
    Would you have a link to that transcription?

    Pretty please?

  8. Maebnoom says:

    heh nevermind I see the link was added – sorry about this spam… ;)

  9. pat donovan says:

    grunt
    like rogers, a politiion exists to suck cash, votes or publicity from any given item.

    the net included. Conservatives do tend to eat their own young, so, like the CBC, attack ads will be banned.

    ads attacking high rates and poor service espically.

    and your little effort buried under pollution .

    don’t give up, thou… SOMEBODY finally listened.

    packrat

  10. Time to e-mail-carpet-bomb the telco execs and politicians
    They have something called “executive e-mail carpet bomb” on consumerist site, and this technique works when the customer service does not solve your problem.

  11. Sal67284 says:

    @Jason

    Wow. Thanks for pointing this out.

    Amazing. If any party has the brains to put Dr. Geist in charge of any of the positions talked about. They will have my vote for the next 10 years without a doubt.

    Great stuff. A must read…

  12. Justin Frydman says:

    I just read your transcript Michael and I must say you are a true fighter of our century. These issues are more important than many realize, and you see the true benefit of openness and are able to convey your research and views in such an amazing way.

    Your knowledge is invaluable to us all as well as your tireless efforts of fighting for fair markets and net neutrality. I am humbled by your efforts and can only say “Thank you” for all the hard work you have been putting in.

    Please, keep up the incredible work.

  13. Just read the transcript as well. Very well done and good to see that there are at least some people in the right positions who are listening. Let’s hope their views don’t get clouded by all the lobbyists who will undoubtedly try to influence their decisions.

  14. The Pirate Bay judge is found NOT biased, was just getting EDUCATION from the entertainment cartels!
    Court Review Says Pirate Bay Trial Judge Not Biased

    Concludes his membership in several pro-copyright groups was merely an educational tool that increased his knowledge of the issues.

    The Stockholm District Court reviewing the charge of bias leveled against presiding Pirate Bay trial Judge Tomas Norström has concluded that the accusation is unfounded.

    via zeropaid. http://www.zeropaid.com/news/86385/court-review-says-pirate-bay-trial-judge-not-biased/

  15. I just read the transcripts as well. Great stuff.

    Thx again Dr. Geist for representing Canadians once again.

    Any Reddits out there? Posted this on reddit if anyone would like to upvote.

    http://www.reddit.com/r/reddit.com/comments/8qvt7/any_canadian_care_about_wireless_broadband_or/

  16. Rodbotic says:

    just wanted to say
    Thank you.

    thank you for your time, effort and commitment to all of these issues and more.

  17. The tone of the discussion was very positive and encouraging. Thank you.

  18. gordonmcdowell says:

    Video of testimony?
    Read the transcript, good stuff. Was this testimony videotaped?

  19. michael geist says:

    Video of testimony
    No – it wasn’t videotaped.

  20. Jerrycan says:

    I wish you were at Canada 3.0
    That speech would have been brilliant…

  21. Government intervention is not the way, technological innovation is
    Asking the government to regulate markets to drive prices down is not the way to get to more economical environments, step change in technology is the way. Such step change will not be realized in situations where governments artificially drive down prices – we will be stuck with the same level of service but will save a buck or two forever. Let the free market have it’s way, if prices get too out of line or service gets too deplorable, necessity will drive innovation and we will see step change that will bypass the incumbents.

    We will suffer in “good enough” mediocrity by driving price and margin out of any industry.

  22. Bob, you’re missing the point of what Gov’t did, at least in the land of DSL….
    When the CRTC force Bell to allow 3rd party DSL providers access to last mile copper, we (consumers) saw access to the fastest DSL profiles at the lowest prices (unlimited bandwidth for ~$30/month). This access to to high speed, low price internet really helped, but now, with the coming of digital media (like using internet for tv) and VOIP, dipping into traditonal Bell business models, What do we see? Bell trying to restrict bandwidth via P2P throttleing and applying for bandwidht caps for all 3rd party DSL providers, even though those same providers do not buy their Internet bandwidth from Bell, only the Last mile access to a customer’s home.

    Look at ANY country that has a progressive, high speed internet infrastructure and a common theme emerges. It is usually a publicly owned, last mile fiber line and rich competitive landscape of Internet service providers.

    We don’t have that in Canada. What we do have is Last mile data connections essentially owned by Cable cos (no competition here since they divide service areas amongst themselves) and Bell, for the most part. The CRTC needs to ensure these monolpolies are kept in check.

    Another option (though I doubt we’ll ever see it here) putting all last mile connections back into the public trust.

    LEt’s face it. Bell already has faster profiles waiting in the wings, but they’re not rolling them out unless the CRTC allows them to NOT share those profiles with other DSL providers.

    Your arguments only make sense in a field of true competition. We won’t have that as long as one firm continues to lay claim to ALL the connections (despite extraordinary rights of way granted and public funds used to help build those networks)

  23. Laurent Mascherpa says:

    Keep it up
    Good job. Canada needs a better internet.

  24. Karl Walters says:

    Extremely well done, and a great sign of someone listening. Thank you so much for being a voice for us Canadians.

  25. Thanks. Excellent piece and excellent, tireless work. Our legislators need to understand that we have to nurture this sector (and not pander to the short-term profit mindedness of our monopolies). The more openness, the better. Nothing grows properly when it’s restricted in its infancy.

  26. Arson Wells says:

    Nigeria > Canada
    I just returned from Europe. I was there for 9 months. Coming back home and looking at getting a mobile plan makes me shudder. Nit-picking minute miser plans, terrible data rates, locked-in agreements and phones, roaming charges, poor 3g access… I spent 3 euros on a sim card as was able to talk to my friend for 9 hours.

    Everyone in Europe has a mobile. Everyone. They use them happily. Canada needs to get with the program ASAP. If it had a comparable system to that of Europe, surely they would increase sales and revenue?

    I wish Vodafone or T-Mobile could step in and just decimate the market with proper prices and service.