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The government may have killed lawful access, but the Canadian Wireless
Telecommunications Association apparently thinks it will return and is
urging the government to earmark revenues generated by the forthcoming
spectrum auction to pay for it. In an appearance before the Standing
Committee on Industry on March 26th,
CWTA President Bernard Lord told the committee that the government
should use the proceeds to cover digital economy priorities including
"lawful intercept requirements for telecommunication service
providers." As I reported last year, the telecom companies were working closely
with the government on lawful access with their key priority being
compensation for the costs associated with the requirements. cwta, lawful access Slashdot, Digg, Del.icio.us, Newsfeeder, Reddit, StumbleUpon, TwitterTagsShareWednesday April 03, 2013 |
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Last week, I posted what I thought was a lengthy post on the state of Canadian wireless competition (and followed that with a condensed version in a column). This week, Telus' Craig McTaggart showed what a long post actually looks like as he issued a 42 page response to my post as well as recent posts by Peter Nowak (here and here) and Open Media. While I won't address everything in McTaggart's post - Nowak responds here and Open Media can address the issues focused on their writing if they wish - a few responses are in order.
McTaggart is clearly
passionate about these issues, going so far as to suggest that claims
that Canada's wireless market is uncompetitive is an "insult to TELUS'
team members." Yet while he decries the use of older data, confusion of
different issues, and cherry picking some statistics, he proceeds to do
exactly that in his response. In fact, the oldest data I've seen in the
myriad of recent posts on these issues can be found in McTaggart's
response as he relies 2005 data to argue that Canadians use their
wireless devices more than most people in the world (page 16).
McTaggart starts his commentary on my post on page 11, going through each of my ten points. I'll follow the same format:
Read More ...
1. Canada's High ARPU Rates
My post
began by arguing that Canada is the most carrier-friendly market in
the world as the carriers extract higher revenues from their users
than any other country as measured by ARPU, average revenue per user
(Peter Nowak extended that analysis in his post).
McTaggart says this is simply a function of Canadians using their
wireless services more than other countries and therefore generating
higher revenues. Yet the best evidence he can muster for that claim
is a Comscore report that talks about Internet video (but not
wireless access), data from 2005 on Canadian voice usage of
wireless, and a Cisco report that lumps North America together.
The reality is that the Bank of America Merrill Lynch Global
Wireless Matrix indicates
that Canadian smartphone penetration is below the developed world
average as measured by smartphones per capita. There is little to
suggest that Canadians are the biggest users of wireless data. In
fact, OFCOM, the British regulator, reported
in December 2012 that the UK was the leading country in mobile
traffic volume per connection and that France and China are the
fastest growing countries (Figure 6.3). Despite the UK's
leadership in mobile use, its ARPU is $29.11, less than half of
Canada's world leading $60.79.
Moreover, McTaggart's effort to minimize the importance of ARPU runs
contrary to each quarterly call from company executives. At the most
recent Telus
quarterly call in February, ARPU was referenced 22 times. That
is typical for all the carriers, who are judged by business analysts
based on their ability to maintain or grow revenue per user.
That creates a significant disincentive to reduce pricing and - as
further discussed below - without sufficient competitive discipline
to reduce pricing, leads to world leading ARPU.
2. Canada's High Wireless Prices
My post
cited data from the CRTC and FCC to support the claim that Canadians
face higher wireless prices than those found in peer
countries. McTaggart doesn't dispute the figures, but argues
that Canadian carrier costs are higher given our geography and so
therefore higher costs should be expected. Yet it is not clear that
Canadian costs are higher. McTaggart provides a chart on wireless
revenue per km, in which Israel is the global leader and Canada
ranks among the lowest revenue earners. However, the Bank
of America Merrill Lynch Global Wireless Matrix indicates that
Israeli wireless companies have far higher capital expenditures on a
per capita basis than the Canadian carriers, despite the much
smaller geographic footprint. In 2011 (the latest year of actual
data), the three Canadian incumbents capex was 2.3 billion or about
$66 per person. By comparison, the three Israeli carriers spent 1.05
billion or about $141 per person.
In fact, both Telus and Bell regularly tout how low their costs are
given the shared network the two companies built. In 2011, their
combined capital expenditure was less than Rogers, showing the value
of splitting the costs. But their customers don't seem to benefit
from those greatly reduced expenditures. In February, Telus CEO
Darren Entwistle told
business analysts:
To have a network sharing partnership that allows us to invest
very effectively in coverage, reliability, cell densification,
deployment of new technologies to address the data and consumption
appetites of our clients - that's a big differentiating factor for
us to make sure that we stay ahead of the curve on technology but
we do it on a very client-friendly and very cost-efficient
fashion.
That's a big benefit for the company, but there is not the price
differentiation one might otherwise expect from a market where two
competitors have sharply lower network costs. Indeed, in February
Bell executive Wade Oosterman told
analysts that not only does Bell have "a fairly significant
cost advantage due to our network sharing agreement" but that he
sees the prospect of increasing wireless data prices as "there
should be some pricing power there to come." Later in the same
call, Oosterman notes that the move to LTE provides another
cost advantage stating that "LTE is a lower cost infrastructure,
lower cost to operate and carry traffic than alternatives." Despite
the cost advantages, Oosterman boasts that the company does not need
to reduce prices.
In recent months, all three incumbent carriers have focused on the
shift to smartphones and prospect of 100% smartphone usage in the
years ahead. The message is clear: we can grow revenues from
within as our customer base shifts to more expensive data plans.
That is good for shareholders, but reduces the need to entice
consumers away from other providers, which ultimately results in a
market that looks uncompetitive to Canadians seeking better pricing.
3. 911 Carrier Fees
My post noted that carriers charge 75 cents per month for E-911
service that carries a tariff of ten cents. That is true for both
Rogers and Bell, but I mistakenly included Telus in that group.
McTaggart is right. 17 million Canadian subscribers pay an
additional 75 cents per month for E-911, not 24 million.
4. High Roaming Fees
My post cited the 2011 OECD study that found that Canadian roaming
fees are among the highest in the world. McTaggart says the report
is no longer accurate with respect to Telus, since it has since
reduced its roaming fees. In fact, McTaggart says Telus seeks the
lowest rates it can get and passes the saving on to its customers.
But that isn't exactly what Telus executives tell analysts during
the quarterly earnings calls. Over the past few calls, higher data
roaming revenues have been consistently referenced by executives as
one of the reasons for increased wireless earnings (this includes
both customers roaming outside the country and non-Canadians roaming
in Canada). For example, in the Q1
call held on May 9, 2012, analysts specifically asked about
increased roaming revenue. Robert McFarlane, Telus' EVP and CFO
responded:
What is changing, as you know, is the international roaming
revenues for us as a result of the HSPA network build. And
sometimes we kind of -- oh, yes, we built that a few years ago, so
that's in the past. What we have to remember is that it enabled us
for the first time to enjoy participation in non-US international
roaming in a meaningful way. It wasn't instantaneous with respect
to whole market, because it was with respect to people had HSPA
handsets as opposed to GSM, and GSM was the dominant side of the
base. So as time has marched on, more and more of the traveling
base has HSPA phones, whether they're our clients going overseas,
or whether they are oversea clients coming here. So there is a
built-in inflator in volume, if you will, that is a multi-year
dynamic that we are really only in year two of, so to speak. So I
think that's a positive contributor -- it is a positive
contributor to our ARPU growth year-over-year, and it would
expected to be so on a go-forward basis.
Roaming revenues have continued to grow, with Telus citing it again
during its most recent
quarterly report in February.
5. System Access/Government Regulatory Fees
McTaggart doesn't claim error here - there is no disputing that
Rogers charges a government regulatory recovery fee - only that
Telus does not. As I argued in my post, these costs would be a
cost of doing business in just about any other sector, but for
Rogers it is a chance to charge for spectrum licensing, CRTC
contributions, and local number portability. Other carriers
(including Telus) have dropped the system access fee, but maintain
an assortment
of other fees for device setup, unlocking, and rate plan
changes.
6. Smartphone Adoption
I raised the smartphone adoption issue in response to the unfounded
Scotia Capital claim that three-year contracts may be responsible
for high smartphone penetration. I noted that other countries are
ahead of Canada in smartphone adoption and have banned three year
contracts. McTaggart says he will let Scotia Capital defend
its claim.
7. Unlocking Phones
McTaggart distances himself from Bell's claim that companies such as
Apple might not sell immediately into the Canadian market if there
was a mandatory unlocking requirement, though he argues that
Canadian carriers have relatively weak bargaining power in
negotiations with device manufacturers. He does note that Telus' fee
is $35 rather than the $75 charged by Bell. That's obviously a
better price, though it is worth asking why a consumer should be
forced to pay anything to remove a lock they didn't want in the
first place, particularly once their phone is not subsidized.
8. Wireless Speeds
My post noted that recent data from Akamai still indicates that
Canadian mobile data speeds are far slower than many peer countries.
McTaggart trashes the Akamai data, calling it wrong, meaningless,
and suggesting that even the company distanced itself from the
Canadian numbers. But if you read the full quote from Akamai, you
find that they stood
by the report:
I believe that the listed mobile carrier would be considered one
of the incumbents, and it appears that they do offer LTE service
as well...Having said that, the observed speeds do look
surprisingly low, especially compared to the US carriers (But they
are relatively in line with the speeds we've seen for that
provider in the other 2013 reports).
It is a surprise to see Canada ranked that poorly, but that doesn't
mean that data is meaningless, particularly since many users are not
on the faster LTE networks. In fact, the 2012 OFCOM study shows LTE
revenues (as of the end 2011) with Canadian revenues and subscribers
little more than a rounding error. That may pick up over time,
but pointing to LTE speeds today means little when most Canadians
face slower speeds.
9. Canada's Lower Wireless Penetration Rates
My post notes that Canadians may love their cellphones, but there
are far fewer subscribers in Canada on per capita basis than in
other countries. McTaggart dismisses this criticism, pointing
to differences in the European market and arguing that the
difference with the U.S. can be attributed to wireline penetration
and a six year delay in launching wireless services. Yet the Bank of
America Merrill Lynch Wireless Matrix says that South Korea has the
same wireline penetration, but wireless penetration of 106.7%
compared to Canada's 78.2% (and South Korea started wireless
services at the same
time as Canada).
Moreover, the U.S. comparison is still relevant, with 107.6%
wireless penetration in a market that shares many of the same
characteristics as Canada (and claims that the wireless industry,
now in Canada for nearly 20 years, is still behind due to a late
entry seems fanciful). McTaggart maintains that smartphone
penetration is the more telling figure, but given that Canadian
wireless penetration ranks below every country in the Wireless
Matrix with the exception of India, Pakistan, and Bangladesh, it is
hard to see why (as noted above, the Wireless Matrix also reports
that Canada is below the developed world average in smartphone
adoption).
10. Spectrum Inefficiency
McTaggart response does not dispute the issue of Canadian spectrum
inefficiency, only that Telus should not be included in the list of
the inefficient. He notes that Telus has less spectrum than Bell or
Rogers, implying that the hoarding problem may be real issue with
their competitors.
telus, wireless competition Slashdot, Digg, Del.icio.us, Newsfeeder, Reddit, StumbleUpon, TwitterTagsShareThursday March 21, 2013 |
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The Standing Committee on Industry, Science and Technology released its report on the Intellectual Property Regime in Canada
yesterday. The report is the result of lengthy hearings that focused on
a wide range of IP issues including patent reform, trademarks,
counterfeiting, and pharmaceutical protection. While most the
recommendations are fairly innocuous - the committee identifies many
issues for further study - there are essentially three main legislative
reform recommendations. One involves limiting the scope of official
marks, which appears to be the result of comments from Dalhousie law
professor Rob Currie (echoed by CIPO's Sylvain Laporte) expressing
concern with governmental abuse of official marks in a way that may
stifle innovation.
The other two are
particularly interesting as they set the stage for the Canada - EU Trade
Agreement and the Trans-Pacific Partnership. First, the report recommends anti-counterfeiting measures similar to those
required by CETA and found in Bill C-56. Should criticism arise over
Bill C-56 or CETA, the government will likely point to this report in
support.
The second involves a
classic case of policy laundering as the government has manufactured
support for CETA and Trans-Pacific Partnership (TPP) provisions that
were not even raised at committee. The report recommends:
Read More ...
The Committee
recommends that the Government of Canada (in order to support
Canadian businesses on the global stage and ensure the
administration of Canada’s IP regime is internationally
compatible and streamlined) ratify the following key
international agreements: the Patent Law Treaty, the Madrid
Protocol and Singapore Treaty for trade- marks, and the Hague
Agreement for Industrial Designs.
But as the NDP
minority report notes:
As the Committee
heard no testimony on the Patent Law Treaty, the Madrid Protocol
and Singapore Treaty for trade-marks, and Hague Agreement for
Industrial Designs, New Democrat committee members are surprised
by the inclusion of a recommendation regarding these treaties in
the majority report. The Committee should seek more information
before pronouncing on such treaties.
So why does the
report include recommendations to ratify several international
treaties that were not discussed by the dozens of witnesses who
appeared before committee (with the exception of a brief
reference to the existence of the Madrid Protocol)? The
answer likely lies in the Canada - EU Trade Agreement and the
Trans-Pacific Partnership. According to leaked
documents, CETA includes provisions that require Canada to
make all reasonable efforts to comply with the Singapore Treaty
and the Patent Law Treaty as well as accede to the Madrid Protocol
and the Hague Agreement. The leaked
U.S. proposal for the TPP IP chapter contains similar
requirements: ratify or accede to the Madrid Protocol and the
Singapore Treaty as well as make reasonable efforts to ratify or
accede to the Patent Law Treaty and the Hague Agreement.
The committee report
represents a case of policy laundering with recommendations to
ratify treaties that were not even discussed at committee. Yet
should Canada reach agreement on CETA or the TPP, the committee
report will presumably be used by the government to short-circuit
further review on those treaties or to simply claim support for
ratification on the basis on a committee recommendation that was
secretly fabricated behind closed doors without any witness
raising the issue during the public hearings.
ceta, counterfeiting, indu, ip, patent, tpp, trademark Slashdot, Digg, Del.icio.us, Newsfeeder, Reddit, StumbleUpon, TwitterTagsShareTuesday March 19, 2013 |
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Last November, Maclean's columnist Paul Wells wrote a piece
on the Canada - EU Trade Agreement in which he expressed doubt about
the ability to conclude the deal ("Everybody connected to the
negotiations assures me there will be a deal. Every public sign I see
makes me think there won’t."). I was skeptical about the prospect of
years of negotiations falling apart and expected the political level
meetings in November to wrap things up. They didn't. Last month,
International Trade Minister Ed Fast and his European counterpart Karel
de Gucht tried again. Still no deal.
While Fast wants everyone to believe that momentum is building toward an agreement, it clearly is not. Over the last year, Canada's lead lawyer on the negotiations resigned, Canada's lead agricultural negotiator was re-assigned, and the EU's lead negotiator has added the EU - Vietnam agreement to his responsibilities with rumours that he will head the EU - Japan trade talks. Fast says he won't negotiate the agreement in the media and then proceeds to do exactly that by staking out positions on agriculture and investment. The same business groups that have been lobbying for the deal issue a public letter on the agreement that does little other than promise "future support."
All of this adds up to missed deadline after missed deadline. In 2010, officials said the deal would be completed in 2011. In early 2011, they said it would be completed by the end of the year. By late 2011, the deadline had moved to 2012. Yet it is now 2013 and Fast admitted this week that there may not be an agreement this year.
Read More ...
Canadian officials
indicate that progress is being made, but the outstanding
issues have remained unchanged for years. Some commentators
claim
the agreement is being held up by "nickel and dime politics", but
leaving aside the nearly $2 billion cost to health care from the
patent reforms alone (which is a lot of nickels), the reality
seems to be that the hold up involves more than just political
posturing. Given that everyone knew the key issues going in,
Canada seems to have hoped that the negotiations would follow a
conventional compromise script: the EU would compromise on some
key concerns (agriculture, investment) in return for Canadian
compromises on issues such as pharmaceutical patents and
agriculture.
But with the EU the
stronger of the two parties, it doesn't see any urgency to
compromise. In fact, with a growing number of EU negotiations
(including talks with the U.S.), compromise with Canada may
undermine its position in more economically important deals.
If CETA were the only deal on the table, it might be willing to
find middle ground, but given the effect on talks with the U.S.,
Japan, India, and Vietnam, the Canadian deal just isn't important
enough to harm its position elsewhere. That suggests the EU is
presenting a take-or-it-leave-it deal to Canada - it wants to win
on all its issues in order to make the agreement worthwhile.
If that is the case,
that leaves three possibilities. The first is that Canada
continues to hold out hope of a compromise. That approach has
failed for several years but hope springs eternal, particularly
when this is the only option that allows the government to present
CETA as a "win." The second is that Canada simply caves to the EU
demands. This gives the government its trade deal, but with
an election in 2015, caving on everything from agriculture to
investor protection to pharmaceutical patents, is a risky
political strategy as a CETA deal won't win many votes but could
prove costly among certain vocal constituencies.
The third
possibility is that CETA is replaced by TAFTA, the Transatlantic
Free Trade Area. At the moment, TAFTA involves only the U.S.
and EU, but there have been reports
that Mexico wants in and Canada might follow suit. The argument
for TAFTA would be that Canada is consolidating its negotiations
into major agreements covering the Pacific (TPP) and Atlantic
(TAFTA) to ensure that it is part of two potential large trading
blocks. The danger with this approach is that Canada becomes
a bit player in both negotiations with even less leverage to
promote Canadian interests. But if CETA isn't going anywhere, the
switch would buy time and the hope that a restart would lead to a
better deal.
ceta, tafta, tpp Slashdot, Digg, Del.icio.us, Newsfeeder, Reddit, StumbleUpon, TwitterTagsShareFriday March 15, 2013 |
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With only limited fanfare, earlier this month Industry Minister
Christian Paradis introduced Bill C-56, the Combating Counterfeit
Products Act. Since no one supports counterfeit products - there are
legitimate concerns associated with health and safety - measures
designed to address the issue would presumably enjoy public and
all-party support. Yet within days of its introduction, the bill was the
target of attacks from both opposition parties and the public.
The NDP raised the issue during Question Period in the House of Commons,
accusing the government of trying to implement the widely discredited
Anti-Counterfeiting Trade Agreement (ACTA) "through the backdoor." The
public also picked up on the issue, noting that the bill appears to be
less about protecting Canadians and more about caving to U.S. pressure
(the U.S. called on Canada to implement ACTA on the same day the bill
was tabled).
My weekly technology law column (Toronto Star version, homepage version) notes the concerns associated with the bill fall into two main categories:
substance and ACTA implementation. The substantive concerns start with
the decision to grant customs officials broad new powers without court
oversight. Under the bill, customs officials are required to assess
whether goods entering or exiting the country infringe any copyright or
trademark rights.
Read More ...
While officials are not intellectual property experts, the
assessment includes consideration of whether any of the Copyright
Act's exceptions may be applied. These determinations are complex -
courts often struggle with the issue - yet the bill envisions
granting these powers to customs officials with no review by a judge
and no limits on the types of goods involved. Should a customs
official determine that there is infringement and that no exception
applies, the goods may be seized and prevented from entering the
country.
In addition to the seizure provisions, the bill involves expansive
information disclosures, with detailed information sharing on
shipments as well as the ability for rights holders able to seek
assistance from Vic Toews, the Minister of Public Safety (who will
be delegated some responsibilities under the Copyright Act) to
detain imports and exports. Moreover, penalties associated with
copyright and trademark are on the rise, with tougher criminal
provisions added to the law.
While most would agree that officials should have sufficient tools
to protect public health and safety, the bill does not confine the
broad new powers to those special cases. For example, the government
could have limited seizures without court oversight to instances
where officials reasonably believe there is a public safety risk,
but the bill treats everything from counterfeit pharmaceuticals to a
suspect painting in the same manner.
The substance of the bill is cause for concern, yet what has many up
in arms is that the bill signals Canada intention to implement ACTA.
Public protests against ACTA were staged throughout Europe last
year, leading to a European Parliament rejection of the treaty.
Similar opposition has arisen in ACTA participating countries such
as Switzerland (which has not signed the treaty), Australia (where a
Parliamentary Committee recommended against ratification), and
Mexico (where a Senate motion rejected it).
ACTA is badly damaged and will seemingly never achieve the goals of
its supporters to emerge as a new global standard for intellectual
property enforcement. But for the U.S., which spent years
pressuring ACTA participants to strike a deal, it still hopes to
revive the agreement by at least garnering the necessary six
ratifications for it to take effect.
With Europe and Switzerland both out of the agreement, there are
only nine countries left. The U.S. apparently sees Canada as an easy
target for support, leading to mounting pressure to implement the
bill. That leaves Canadians with Bill C-56, which may be
characterized as a counterfeiting bill, but whose primary objective
appears to be to satisfy U.S. pressure to implement an agreement
that the majority of our major trading partners have either never
signed or flatly rejected.
acta, c-56, copyright, Counterfeit, Counterfeiting Slashdot, Digg, Del.icio.us, Newsfeeder, Reddit, StumbleUpon, TwitterTagsShareWednesday March 13, 2013 |
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Canipre, a Montreal-based intellectual property rights enforcement firm, has admitted
that it is behind the Voltage file sharing lawsuits involving TekSavvy
in what is described as a "speculative invoicing" scheme. Often referred to as copyright
trolling, speculative invoicing involves sending hundreds or thousands of demand
letters alleging copyright infringement and seeking thousands of dollars
in compensation. Those cases rarely - if ever - go to court as the
intent is simply to scare enough people into settling in order to
generate a profit.
Canadian Business reports
that Canipre's goal is to import the speculative invoicing strategy to
Canada and that it found a willing partner in Voltage Pictures. Canipre
collected thousands of IP addresses that are alleged to have downloaded
Voltage films and Voltage is now asking the Federal Court to order
TekSavvy to disclose the subscriber names linked to the IP addresses.
The Canipre admission is
important because it is consistent with arguments that the case
involves copyright trolling and that the Federal Court should not
support the scheme by ordering the disclosure of subscriber contact
information.
Read More ...
CIPPIC's December
letter to the court raised this possibility, arguing that
"such a purpose is improper and bars the applicant from
establishing a bona fide claim." CIPPIC followed up with an affidavit
that identified 22 file sharing cases involving Voltage in the
United States. Distributel raised similar arguments in its challenge
against NGN Prima Productions, which also involves Canipre.
Distributel argued:
The Moving
Parties appear to be engaged in a practice to profit by engaging
in zealous copyright enforcement, a practice referred to as
"copyright trolling". It involves sending letters to customers
demanding significant financial compensation for the alleged
copyright infringement. The amount of money demanded far exceeds
any potential damages to the Plaintiff arising from the alleged
breach. The customers are threatened with legal action if they
do not comply. Following the November Motion, at least one
Distributel customer received such a letter.
The speculative
invoicing practice has faced serious criticism from courts in
other countries. In the UK, the practice has led to findings
of professional misconduct for several lawyers and adverse court
rulings. For example, in the ACS case the court considered
the possibility of banning the practice, with the lawyer
ultimately suspended
from practice for two years. In the Golden
Eye case, the UK court ruled against sending thousands of
letters with set payment demands and sought to discourage
speculative invoicing schemes, stating:
I do not consider
that the Claimants are justified in sending letters of claim to
every Intended Defendant demanding the payment of £700.
What the Claimants ought to do is to proceed in the conventional
manner, that is to say, to require the Intended Defendants who
do not dispute liability to disclose such information as they
are able to provide as to the extent to which they have engaged
in P2P filesharing of the relevant Claimants' copyright works.
In my view it would be acceptable for the Claimants to indicate
that they are prepared to accept a lump sum in settlement of
their claims, including the request for disclosure, but not to
specify a figure in the initial letter. The settlement sum
should be individually negotiated with each Intended Defendant.
U.S. courts have
also raised questions about copyright trolling practices, with concerns
that the lawsuits constitute a "fraud on the courts" and some
courts rejecting
demands for subscriber disclosures. In fact, just yesterday a U.S.
court ordered
copyright trolls to appear in court to face allegations of
misconduct.
Canipre's admission
could have a major impact on the TekSavvy and Distributel cases as
it removes any lingering doubt that these lawsuits involve
copyright trolling that are unlikely to proceed to trial.
Alongside copyright reforms that cap
statutory damages in Canada for non-commercial infringement,
the Federal Court may think twice before ordering the disclosure
of personal information of thousands of subscribers in support of
what is now acknowledged to be a speculative invoicing scheme.
canipre, copyright, speculative invoicing, teksavvy, trolls, voltage Slashdot, Digg, Del.icio.us, Newsfeeder, Reddit, StumbleUpon, TwitterTagsShareTuesday March 12, 2013 |
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In the aftermath of the CRTC's hearing on a consumer wireless code and
the government's announcement of its plan for future spectrum auctions, a
debate has raged over the competitiveness and health of the Canadian
wireless market. Scotia Capital released a report last week titled "Canadian wireless myths and facts"
that argued the Canadian market is healthy and that "it is time for the
regulators to declare victory on the policies they adopted five years
ago". Meanwhile, Open Media issued a report titled Time for an Upgrade: Demanding Choice in Canada's Cell Phone Market
that places on the spotlight on many of the ongoing problems in the
market, with a particular focus on consumer complaints. The report
includes many recommendations for regulatory and policy reform.
The reality is that both the regulators and politicians have either
expressly or impliedly acknowledged that the Canadian wireless market is
uncompetitive. Last week, Industry Minister Christian Paradis promoted
the government's past moves on wireless competition, but admitted that "there is much more to do." Meanwhile, the Competition Bureau told the CRTC in its submission on the wireless code of conduct that:
certain impediments continue to diminish the effect of competitive
forces in this industry. First, certain industry practices have tended
to impose costs on consumers who wish to avail themselves of competitive
alternatives. Second, consumers are not always provided with sufficient
information in an adequately clear manner to make informed purchase
decisions.
This post seeks to extend the debate and respond to some of Scotia
Capital's claims. It identifies ten reasons why there is ample evidence
that the Canadian wireless market remains woefully uncompetitive when
compared with peer countries around the world with higher costs, price
gouging, and restrictive terms.
Read More ...
1. Canadian Carriers Enjoy the Highest ARPU in
the World
While there many ways to calculate the competitiveness of a wireless
market, the one that matters most to the carriers and business
analysts is ARPU, the average revenue per user. By that
standard, Canada is the most carrier-friendly market in the world as
the carriers extract higher revenues from their users than any other
country. The Scotia
Capital report points to declining voice ARPU in Canada,
claiming "this was largely due to competition and data/text
substitution." The reality is that competition has little to do with
declining voice ARPU as it is dropping around
the world ( Europe,
U.S.)
with changing usage patterns.
Moreover, it is total ARPU that matters, not voice ARPU. On that
front, Scotia Capital notes
that ARPU for Bell, Rogers, and Telus has been largely unchanged
since the entry of the new wireless competitors (Bell is up
slightly, Rogers and Telus down slightly). When compared to other
countries, Canadian ARPU stacks up as the highest in the world. The
CRTC's Communications
Monitoring Report 2012 shows Canadian ARPU as tied with Japan
as the highest among eight leading economies (Canada, US, UK,
France, Germany, Italy, Japan, and Australia) (Figure 6.1.9). In
other words, despite new entrants designed to spur greater
competition, the incumbent providers are still enjoying
world-leading ARPU, which is indicative of a market sorely lacking
in strong competition.
2. Higher Consumer Prices than Peer Countries
Scotia Capital trumpets
Canadian pricing, noting that a comparison of plans reveals that
they are cheaper than those found in the U.S. Yet the comparison
with the U.S. ignores the many other peer countries where Canadian
consumer prices remain higher. In fact, the U.S. comparison is
convenient since it stands as one of the only countries where
Canadian prices compare favourably in some studies. The CRTC's Communications
Monitoring Report 2012 provides data comparing wireless
service pricing across three levels - basic users, average users,
and premium users - in Canada, the U.S., UK, France, Australia, and
Japan (Table 6.1.1).
The CRTC report finds that Canadian prices are on the higher end
across each category. For basic users, Canada ties with the U.S. as
the most expensive country (double the price of the UK). For average
and premium users, Canadian prices were the third most expensive
among the surveyed countries. While the U.S. was more expensive in
both of those categories, Canada was far more expensive than the UK
and Australia in every category and more expensive than France and
Japan in two out of three categories.
Moreover, last August the U.S. Federal Communications Commission
released its third annual International
Broadband Data Report, which compares broadband services as
required by a U.S. law. Canada ranked 26th out of 37 countries for
the cost of smartphone data based on plans with usage limits. Canada
did not even rank in a comparison of countries with no usage limits
since no such plans could be found. In other words, concerns that
Canadian prices are high is no myth.
3. Still Gouging, Part One: Enhanced 9-1-1
Costs
A clear indication of an uncompetitive market are fees to consumers
that are relatively uniform across the major carriers but that bear
no relationship to actual costs (in a competitive market, carriers
might be expected to reduce those fees to closer to actual costs in
order to lower prices and attract more consumers). For example, the
incumbents all charge their subscribers 75 cents per month for
enhanced 9-1-1 services.
But as WindMobile told
to the CRTC during the consumer wireless hearings (para 10084), the
actual cost for E-911 service is closer to ten cents. WindMobile
does not include a separate fee for E-911 on its service, choosing
instead to bear the cost. However, it pays a monthly tariff rate for
E-911, which it told the CRTC was "around seven to 11 cents."
Assuming the tariff rate more closely reflects actual cost, the 75
cent charge to consumer represents an enormous markup. Consider the
costs to Canadian consumers: assuming an actual cost of 10 cents per
month, the carriers generate 65 cents profit per subscriber per
month. With roughly 25 million subscribers with the incumbent
carriers, that is an extra $180 million in annual revenue after
costs are covered.
4. Still Gouging, Part Two: High Roaming
Costs
A 2011
OECD study captured national headlines after it found that
Canadian carriers had the most expensive data roaming charges in the
world. The study looked at the cost of using 1 MB in a single
session for a traveler assuming they travel to all OECD countries.
The result left Canadians paying the most at an average of $24.61.
By comparison, Greek consumers paid $4.17 and Iceland customers paid
$4.42. The OECD average was $9.48. The report included several other
baskets of roaming data with Canada typically ranking among the most
expensive (with the exception of 20 MB packages).
In the two years since that study, Canadian carriers have introduced
various measures to address roaming costs, but the persistent
stories of roaming sticker shock remain. For example, last week the
CBC reported
on a B.C. family that ran up $22,000 in charges for 12 hours of
YouTube streaming while in Mexico. While critics of the story argued
that Rogers never actually billed the full amount and noted that
cheaper roaming packages were available, left unsaid was any
explanation for how charging $30 for one MB as a pay-per-use charge
is anything other than gouging. Indeed, other countries have taken
action against high roaming fees with the European Union placing
price caps on data roaming and opening the door to greater
competition on roaming rates next year by separating domestic
service from roaming service. The OECD has also recommended
that countries take action, including the possibility of wholesale
or retail price regulation.
5. Still Gouging, Part Three: Regulatory
Recovery Fees
A long-time staple of the Canadian wireless market was the
system access fee, which misleadingly suggested a fee for accessing
the network that was mandated by the government or the CRTC. In
fact, the fee was not a regulatory requirement, but rather an effort
by the carriers to disguise the actual costs of their plans as it
shifted nearly six dollars each month to a separate fee item. Some
carriers dropped the system access fee in 2009, though a multi-billion
dollar class action lawsuit continues to wind its way through
the courts.
Rogers replaced the system access fee with a monthly government
regulatory cost fee. These costs would be a cost of
doing business in just about any other sector, but for Rogers it is
a chance to charge for spectrum licensing, CRTC contributions, and
local number portability. Other carriers have dropped the
system access fee, but maintain an assortment
of other fees for device setup, unlocking (see below for
more), and rate plan changes.
6. Three Year Contracts Are Not Correlated
to Smartphone Adoption
The Scotia
Capital report touts the value of three-year contracts,
arguing that "we think the three-year contract has actually led to
low handset prices that helped smartphone penetration in Canada."
Yet the evidence doesn't appear to support claims that there is a
correlation between three year contracts and smartphone adoption.
Comscore just released its 2013
Mobile Future in Focus report which indicates that Canada is
ranked third for smartphone adoption, trailing Spain and the UK, but
ahead of France, Italy, Germany, and Japan (no other countries are
listed).
If Scotia Capital were right, one would expect three year contracts
in other countries with leading smartphone adoption such as Spain
and the UK. But Spanish incumbent carriers have actually reduced
handset subsidies in recent months and new entrants have
aggressively promoted two-year contracts with a better subsidy than
that offered in Canada (the iPhone
5 is available for free from Yoigo, a new entrant, with only a
€25 per month cost). Meanwhile, the UK banned
three year contracts in 2011, making a two-year contract the longest
permitted and requiring all carriers to offer one-year deals. With
countries ahead of Canada in smartphone adoption rejecting the
three-year contract, claims that it is needed to help smartphone
adoption simply isn't supported by the experience elsewhere.
7. Mandatory Unlocking of Phones Does Not
Delay Market Entry of New Devices
During the recent CRTC hearing on a consumer wireless code, Bell
claimed that a rule mandating unlocked phones would delay entry of
new devices into the Canadian market. The company told
the CRTC (para 8041):
I don't know because I'm not Apple but we were discussing, for
example, would Apple have allowed -- if Canada had a rule that
mandated unlocking, would we be one of the first countries to get
the latest iPhone? I don't think so. I think they would want to
launch it in other countries. I'm not saying that it wouldn't come
to Canada. So I don't want to overexaggerate to say they wouldn't
ever. What I'm saying is if we had a rule like that, I think it's
going to put Canadians getting iPhones, the next generation iPhone
later if it was a mandated requirement.
Yet there is no evidence to suggest that Apple would delay entry
into the Canadian market due to an unlock requirement. JF Mezei of
Vaxination Informatique notes in his final
submission to the CRTC:
The incumbents argued that Apple's iPhone would not be available
as quickly in Canada if a requirement it be sold unlocked were
made. For the iPhone5 launch, Hong Kong (which requires unlocked
handsets) was part of the original list of locations (including
Canada and USA) which got the iPhone5 on launch day (Sept 21).
Italy and Finland [which also require unlocked handsets] got the
iPhone a week later on the same date (Sept 28th) as the other
western European countries.
Not only are the claims of delayed market entry unsubstantiated fear
mongering, but the exorbitant fees for unlocking should be factored
into the analysis. Bell charges $75 to unlock a device and admitted
to the CRTC that "we absolutely could do it for less. We choose
not." (para. 7916). That fee - effectively an additional $2 per
month charge on a three year contract to unlock a phone - poses a
significant additional cost for consumers and helps lock consumers
into the high roaming fees discussed above.
8. Actual Canadian Mobile Speeds Are Slower
than Peer Countries
Canadian wireless providers have trumpeted their new LTE networks,
yet recent data from Akamai still indicates that Canadian mobile
data speeds are far slower than many peer countries. The most recent
Akamai
State of the Internet report (2012, Q3) includes data on
carriers around the world. There is data on one Canadian carrier,
which badly trails both average and peak speeds when compared to
China, Hong Kong, Singapore, Austria, Belgium, Czech Republic,
France, Germany, Greece, Hungary, Ireland, Israel, Italy, Lithuania,
Netherlands, Russia, Spain, UK, Australia, and New Zealand.
The CRTC reported similar slow speeds (based on Akamai data) in its
2012
Communications Monitoring Report (figure 6.1.8), with Canadian
mobile data speeds slower than all other countries in the comparison
group.
9. Fewer Subscribers Per Capita in Canada
Than Peer Countries
Canadians may love their cellphones, but there are far fewer
subscribers in Canada on per capita basis than in other countries.
The CRTC's 2012
Communications Monitoring Report reported that Canada had the
lowest mobile subscription penetration among Canada, the U.S., UK,
France, Germany, Italy, Japan, and Australia (Figure 6.1.5). While
higher penetration rates (well over 100 subscriptions per 100
inhabitants) may be expected from European countries where roaming
between countries in close proximity is widespread, Japan and
Australia are islands and the U.S. market is not driven by roaming
outside the country. Yet the U.S. (106 per 100), Japan (101 per
100), and Australia (130 per 100), all rank well ahead of Canada's
78 per 100. With prices high and contracts long, Canadians are often
locked into a single provider and less likely to subscribe with more
than one device.
10. Canadian Carriers are Inefficient Users of
Spectrum
The incumbent carriers continue to claim that they need more
spectrum, yet Canadian carriers have hoarded more spectrum than
their counterparts in practically any other country. In 2011, the
CTIA, the lead association for U.S. wireless companies, compared
the amount of spectrum with the number of wireless subscribers
to determine how many subscribers are served per MHz of spectrum
allocated. In a comparison of ten leading countries, Canada ranked
last in spectrum efficiency. While the U.S carriers used one MHz to
nearly 740,000 subscribers, the Canadian rate was 90,992 subscribers
per MHz. The Canadian market was the smallest of the 10 countries
(which would reduce the number of subscribers per MHz), but the data
suggests that Canadian carriers could do far more to maximize
current spectrum holdings and reduce their costs in the process.
canada, crtc, telecom, wireless Slashdot, Digg, Del.icio.us, Newsfeeder, Reddit, StumbleUpon, TwitterTagsShareSunday March 10, 2013 |
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I'm a big fan of Chris Selley, the National Post writer behind Full Pundit, a daily look the Canadian editorial and opinion columns (last year Selley was also a vocal supporter of the much-needed Fire Ron Wilson
campaign). The Full Pundit features a summary of the most notable
editorial writing in Canadian media accompanied by quotations from the
original works. I'm quite sure that Selley does not ask for permission
to quote from those other works since fair dealing for news reporting
purposes permits their use without the need to do so. Yet if someone
wants to post a quote from Selley or anything else written by the
National Post, they are now presented with pop-up box seeking a licence
that starts at $150 for the Internet posting of 100 words with an extra
fee of 50 cents for each additional word (the price is cut in half for
non-profits).
Read More ...
For example, in
yesterday's Full
Pundit, Selley quotes John Graham in the Globe on the death
of Chavez:
“Illiteracy has
all but disappeared. … Education and free health care are almost
universally available. … Improving the quality of life for
millions at the bottom levels of society is no small
achievement. He also imparted to these millions a sense of
dignity about themselves and pride in their leader’s often
bombastic rhetoric.”
If you try to
highlight the text to cut and paste it, you are presented with a
pop-up request to purchase a licence if you plan to post the
article to a website, intranet or a blog. The fee would be $150.
In other words, the National Post is seeking payment for text in
an article that was itself copied from the Globe. Of course, it is
not just Selley's work as many articles quote from other articles
or sources (for example, this Post
article on Taylor Swift is primarily quotes from Vanity
Fair. If you highlight a chunk of text, the licence message
pops up). If you click no to the pop-up, you cannot copy the text. If you click "quit asking me", the request stops.
None of this
requires a licence or payment. In fact, the amount of copying is
often so insubstantial that a fair dealing analysis is not even
needed. Last year, the Federal Court of Canada ruled
that several paragraphs from a National Post column by Jonathan
Kay posted to an Internet chat site did not constitute copying a
substantial part of the work. If there was a fair dealing
analysis, there is no doubt that copying a hundred words out of an
article would easily meet the fair dealing standard. In fact, the
Supreme Court of Canada has indicated that copying full articles
in some circumstances may be permitted.
The National Post is
using iCopyright as its licensing service. The company
provides a fair
use statement that simply does not reflect the law,
suggesting that fair dealing may not apply to the use of work that
may generate revenues, is not highly creative, was available under
licence, is something more than a footnote, or is posted to the
Web. None of these are conditions that exclude the application of
fair dealing and the recent Supreme Court of Canada decisions make
it clear that the required broad and liberal approach would cover
the excerpt copying for which iCopyright seeks payment. All media
organizations rely on fair dealing to support a free and robust
press. Those same organizations should not be undermining those
hard earned users' rights by raising unnecessary licensing
demands.
copyright, fair dealing, national post Slashdot, Digg, Del.icio.us, Newsfeeder, Reddit, StumbleUpon, TwitterTagsShareThursday March 07, 2013 |
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The government is
characterizing its Bill C-56 as an anti-counterfeiting bill, yet this
week NDP MP Charmaine Borg framed it more accurately as "ACTA through
the backdoor." During Question Period on Monday, Borg asked Industry Minister Christian Paradis directly if the bill paves the way for ratification of the discredited treaty:
Mr. Speaker, last
July the European Parliament rejected the anti-counterfeiting trade
agreement over serious concerns about the regressive changes it would
impose on intellectual property in the digital age. Yet on Friday, the
Conservatives introduced a bill in the House that would pave the way for
the ACTA without question. Canadians have concerns about goods being
seized or destroyed without any oversight by the courts. Will the
minister now be clear with Canadians? Are the Conservatives planning to
ratify ACTA, yes or no?
Paradis refused to respond to the ACTA ratification question: Read More ...
Mr. Speaker, we
are very happy to have introduced an anti-counterfeiting bill in
the House. Counterfeiting is a growing problem in Canada.
Counterfeiting deceives Canadians and is linked to
security-related issues. So it was our duty to modernize the
legislation to ensure that we can end counterfeiting, so that
Canadians are not deceived, and to provide better security.
Borg tried
again with a direct link between Bill C-56 and ACTA:
Mr. Speaker, a
number of countries have rejected this unacceptable agreement.
The anti-counterfeiting trade agreement - ACTA - was drafted
behind closed doors and would incriminate the daily users of
cultural content. This agreement will turn our border officers
into instant copyright experts, without the adequate legal
support. Canada must seriously study the problem of
counterfeiting. However, the failure of Bill C-30 means that
Canadians do not have faith in this Conservative government. Is
Bill C-56 not simply a way to support ACTA through the back
door?
Paradis ducks
the question once again:
Mr. Speaker, let
us be clear: Bill C-56 is a way to support and protect Canadian
families.
Counterfeiting is a growing problem that must be stopped.
Counterfeiting deceives Canadians and poses risks to the safety
of Canadians. We must ensure that the legislation is updated and
appropriate in order to equip the authorities with effective
tools to fight counterfeiting, which is exactly what was
introduced on Friday. If the NDP is responsible, I hope they
will support us.
The 52 page bill
requires careful scrutiny, but the NDP is right for drawing
attention to the elephant in the room. ACTA has been rejected in
Europe and stands as a discredited agreement. Despite that, Bill
C-56 is fundamentally a bill designed to allow Canada to implement
ACTA.
acta, c-56, counterfeiting, ndp Slashdot, Digg, Del.icio.us, Newsfeeder, Reddit, StumbleUpon, TwitterTagsShareWednesday March 06, 2013 |
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The movie Argo may have picked up the biggest prize in last week's
Academy Awards ceremony, but it was the Best Documentary Short winner
that had many on the Internet buzzing. Inocente, a film about a 15-year
old homeless girl who dreams of becoming an artist, took home the Oscar
and in the process became the first Internet crowdsource funded film to
win Hollywood's biggest award. Last year, the film raised $52,527 on
Kickstarter, a crowdsource funding website that has raised over US$100
million to support the creation of independent films.
My weekly technology law column (Toronto Star version, homepage version) notes that the emergence of crowdsource funding - or crowdfunding - points to the
power of the Internet as an important source of financial support for
independent creators, whether film makers, musicians, software
programmers, or authors. Crowdfunding enables creators to raise funds
through small contributions from the public by publicizing their project
using the Internet and social media sites. Crowdfunding success stories
encompass new products, companies, and community initiatives, but
movies have fared particularly well.
Read More ...
Kickstarter is the best-known crowdfunding site, having raised huge
sums of money and seen the films funded by its community enjoy
commercial and creative success. By the end of this year, over
100 Kickstarter-funded films will have been released theatrically in
North America. In 2012, three Kickstarter funded films ranked among
the best reviewed films of the year with six films - two
documentaries, a live action short, and three documentary shorts -
garnering Oscar nominations.
The live action short nominee, Buzkashi Boys, was the work of
Montreal-based filmmaker Ariel Nasr. Nasr turned
to Kickstarter to help complete his film about Afghanistan and
the community responded with over $27,000 in funding. After the film
received its nomination, Kickstarter users provided another $10,000
to cover travel costs for the stars in the film to travel from Kabul
to Hollywood.
While Kickstarter attracts the lion share of crowdfunding attention,
Canadians may face some challenges in using the platform due to
payment restrictions. A 2012
report commissioned by the Canada Media Fund points to many
homegrown alternatives, yet few have gained much traction. A notable
exception is DocIgnite, a site run by the Hot Docs festival in
Toronto that identifies works-in-progress that would benefit from
crowdfunding.
The barriers to Canadian crowdfunding extend beyond payment problems
and sparsely populated websites. Legal uncertainty about venturing
into crowdsourced investment has limited the ability of Canadian
creators to tap into their home market.
Canadian sites are typically based on a donation model in which
there is no expectation of financial return, though some creators
offer incentives and gifts in return for support. The United States
has opened the door to an investment model that would allow for
crowdfunding investments that could result in revenue sharing or the
issuance of stock in the project or company.
The Ontario Securities Commission just closed a consultation
on the issue with many potential safeguards being considered. These
include registration requirements, investment limits, disclosure
obligations, and "cooling off" periods that would allow investors to
back out of an investment.
The failure of Canadian crowdfunding sites to keep pace with sites
such as Kickstarter unsurprisingly means that creators are forced to
look south of the border for financial support. Given the many
success stories, Canadian funding agencies may soon begin to factor
crowdsourced support into their programs.
For example, agencies could shift some of their support toward a
matching funds approach that encourages creators to look beyond the
conventional funding mechanisms. By tapping into Kickstarter-style
initiatives, creators could benefit from greater financial
assistance just as the funding agencies use crowdfunding as an
external review process, leveraging the public's willingness to back
a project with their own support.
cultural policy, kickstarter Slashdot, Digg, Del.icio.us, Newsfeeder, Reddit, StumbleUpon, TwitterTagsShareTuesday March 05, 2013 |
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