Ottawa has to increase competition not only for consumers but businesses as well, the head of Manitoba’s phone company told an industry conference.
The most recent round of wireless spectrum auctions have benefited consumers by opening the market to new service providers and spurring incumbents’ investments in new HSPA networks, Pierre Blouin, CEO of MTS Allstream told the Canadian Telecom Summit in Toronto on Tuesday. But, he added, small and mid-sized businesses have not reaped similar rewards.
“We urgently need a policy that encourages the same kind of competition and innovation in the business [telecom] market as we are seeing in the consumer market,” he said. “This isn’t an issue that captures the public attention, but the stakes are far higher,” he added, given that small and medium-sized businesses account for 70 per cent of all private sector employment and 45 per cent of Canada’s GDP.
MTS officials made the same point last week at a CRTC hearing into whether the regulator should order incumbents to give competitors access to their new high speed networks.
Incumbent phone and cable companies have benefited from a century or so of capital investment funded under a regulatory regime, he said, while competitors and new wireless entrants have been forced to rely more heavily on debt because of Canada’s limits on foreign investment, he said.
Blouin noted that Canada at one point had 14 facilities-based competitors to incumbents, and is now down to just MTS Allstream, the incumbent Manitoba phone company, which offers services to business customers in most provinces through a fibre optic network. However, it needs last-mile connectivity from incumbents.
AT&T Canada, which MTS eventually bought, was the first competitor to the incumbents to build out a national IP network — at a cost of about $4 billion. In 2002, it underwent what was at the time the second largest restructuring in Canadian history because it couldn’t afford the $400 million in annual interest charges on the debt it acquired, he said.
“If not for Canada’s restriction on foreign ownership, the build-out would have been funded with equity and not only debt and the bankruptcy could have been avoided,” said Blouin.
He also lamented the position the federal telecom regulator, the Canadian Radio-television and Telecommunications Commission (CRTC), has taken in defending limited foreign investment by arguing that the telecom sector is too important to permit more investment from abroad.
“We think this is backward,” Blouin said. “If the industry is that important, shouldn’t we do everything we can to welcome more investment and attract capital?”
Blouin was one of three keynote speakers at the annual conference, where industry leaders talk about issues and future trends.
For his part, CRTC chair Konrad von Finckenstein said in his keynote that the commission has proposed raising the limits on direct and indirect foreign ownership to 49 per cent from about 46.7 per cent. The CRTC, he added, doesn’t interfere in the marketplace.
“We have made sure we only regulate when there is a requirement to do so or the market doesn’t produce or someone needs to be protected.”
Von Finckenstein maintained there is “close to a national consensus” among Canadians who want a national broadcaster. And opening the floodgates would be expensive, he said.
“If you take away ownership restrictions, inevitably you will have to go into a massive subsidization regime of Canadian content,” he said.
The CRTC, he said, supports overhauling the Telecommunications Act and simplifying it to reflect the convergence of broadcasting and telecommunications.
“We have separate regulatory acts (for telecommunications and broadcasting) and different objectives and mechanisms; it’s not efficient,” he said. “I think we have to rethink the whole thing because our acts are based on the concept that we control access and that you can’t operate here unless you have a licence.”
That’s no longer the case with the Internet, however.
Robert Depatie, CEO and president of Quebec cable operator Videotron Ltee., said the company sees its new wireless network, set to launch near the end of the summer, as a way to bridge the digital divide that separates the rural and urban Internet experience. Although the company already offers 50 MBPS cable Internet service, its broadband cable network doesn’t reach into all of Quebec’s nooks and crannies.
”Now that we have a wireless broadband network as well, we see that as the means to expand the Videotron experience to mobile users and those beyond the reach of our fixed broadband services,” he said.
And while Videotron’s network will always be a hybrid of coaxial cable, fibre optics and wireless, wireless will become the most important element of that network within a decade, he predicted.
While its cable, broadband and telephone sales are at record levels, Depatie said, “Our disappointment has been in wireless and we’re about to change that. We are on the verge of launching Quebec’s most competitive service.”
He also called upon the federal government to approach the upcoming 700 and 2500 MHz spectrum auctions with the “greater good” in mind.
“In our view the upcoming auction of the 700 MHz frequencies is one of the defining events in the next evolution of Canada’s communications marketplace,” said Depatie. “These lower frequencies are the beachfront property of the spectrum world with excellent propagation characteristics that make them particularly effective for rural coverage.”
The rules of the auction, expected to be held next year, haven’t been set yet by Industry Canada. The department will shortly announce an industry consultation but already lines are being set. Incumbent phone and cable companies insisting the auction should have no special rules to protect new wireless companies like Wind Mobile, Public Mobile and Mobilicity, while the startups insist without protection they won’t be able to add to their spectrum and will have no future.
