Wirelessnorth.ca

In what can only be described as a game of high-stakes legal douchebaggery, Bell and Telus have forced Globalive to review their foreign ownership before a public CRTC hearing. Telus in particular has been throwing every legal means they can at Globalive to try and hold up the upstart’s launch date. Needless to say, Globaliver are eating their livers over this latest development. And probably you should be too. There’s little in this antiquated idea of nationalistic telecom protectionism that helps Canadians in this context. In fact, one could probably point to the long coddling of Canada’s domestic telco industry for our current oligopolic-ish sort of situation.

From Today’s NationalPost:

Globalive Wireless has been racing to bring its offering to market as quickly as possible. By next summer, without the delays occasioned by the CRTC review, Globalive Wireless would have launched its services in many Canadian markets, employed an estimated 2,000 people and spent over $1 billion building its network.

The incumbents responded to the threat of new competition in predictable ways: they cut prices and suggested they would provide better customer service. Fair enough although one wonders whether that would have happened without the threat of more competition. Somewhat more cynically, they sought to game the regulatory system in a way that could delay and seriously complicate the introduction of wireless competition.

LINK: Wireless Wars: Barriers to new providers -Ken Campbell CEO Globalive Wireless
Funny that Rogers doth not protest. It’s almost like they know that as the one carrier selling out iphones, blackberries, and rocket sticks faster than they can back up the trucks, that they are the least of whose lunch will be eaten by the upstarts.

Anytime a vendor is granted a monopoly by the government, we should expect that vendor to manage their monopoly to maximize profits. When we license spectrum to mobile carriers, or TV networks, we are granting (or selling) them a monopoly over the management and use of a shared social resource. It is like giving the major oil companies an exclusive license to all of the oil in the US and expecting them to aggressively invest to increase the efficiency of extraction to drive down the price of gas at the pumps. The much more likely commercial reaction would be to extract slowly and manage the availability of the resource to keep the price and their profits high.

So, I for one am convinced that we do not use spectrum efficiently. Only a small portion of this important resource is in active use at any one time, and even when it is in use, most applications tie up a lot more spectrum than they need.

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I have heard a couple of reasonable arguments against increasing the amount of open spectrum. The first is that the government needs to grant a limited monopoly in spectrum in order to create an incentive for an operator to invest in the network that will operate in that spectrum. I am not an economist but I do know the cost of network infrastructure is coming down fast, and I suspect that it may already be low enough that network operators can create business plans that are attractive to private capital. More intriguing is the possibility that networks could be built in open spectrum as a series of interconnected networks like the Internet. This would radically reduce the capital requirements for any single network node, and likely lead to the creation of very efficient network back bones just as we have seen happen with the Internet.

A more subtle version of this argument is that a government granted monopoly creates the profits that fund the research and development spending needed to increase the efficiency of spectrum use. Advocates of licensed spectrum will likely point to the absolute size of their investment in R&D and argue that they will not be able to do that unless they have a monopoly that generates the profits needed to support that R&D. The problem with that argument is that there is no evidence that that R&D is creating real consumer benefit, and there is at least anecdotal evidence (I spent my early career poking around Bell Laboratories) that large, over-funded, research groups are an inefficient way to get innovation to market.

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The $7.2B the administration has committed to broadband infrastructure appears to be headed for shovel ready projects by established telecom carriers to deploy outdated and inefficient technology that will perpetuate their market dominance and dampen innovation. This is the wrong kind of government intervention into the market. It is not that it is not well intentioned, and I am not qualified to talk about it’s effectiveness as a stimulus, but it will not have nearly the lasting impact that it could have if it were targeted at disruptive innovation in open spectrum. Why? Because access to those dollars will be a highly politicized process that will result in the firms with the most access getting the most dollars. Those firms tend to be the incumbent telcos and cable companies who have an obligation to their shareholders to maximize their profits by defending their duopoly. They have no interest in more open spectrum that would create an incentive for private capital to finance wireless alternatives to the wires that they now control to the home.

If the administration were to create more open spectrum, they would be creating a vibrant market. They would actually be taking the politics out of the management of communications. It may be tough in these times to walk away from potential revenue from the auction of spectrum, but the administration can have a much more profound and lasting impact on the quality of life of all Americans by opening up spectrum than they every could by putting stimulus dollars in the hands of the incumbent duopoly.”

Think wifi. Wifi works one of two tiny bands of unlicensed “open” spectrum. You don’t need a license to set up a wifi network. It just works.

The world needs (a lot) more open spectrum. Unfortunately for Canada we don’t have a market big enough to go it alone, we need the US to go first to establish a large enough market for good standards, devices and markets to emerge based on open spectrum. Spread the word.

LINK: Open Spectrum is Good Policy

Attention spectrum pundits, industry Canada has just put out an RFP to ask the topical question: how much is spectrum worth? It would seem that a big chunk of existing spectrum licenses are coming up for renewal, and the government is wondering how much to charge the incumbents to roll the licenses over for another year.

Cellular and Personal Communications services (PCS) have been issued by the Minister for systems operating in the bands 824 to 849 MHz and 869 to 894 MHz for Cellular and 1850 to 1910 MHz and 1930 to 1990 MHz for PCS. Authorizations were assigned through a comparative review process in 1985 and 1995. In addition, PCS spectrum licences were auctioned in 2001. All these licences will be up for renewal at approximately the same time, April 1, 2011, and will attract an annual licence fee for the next 10 year licence term.

The Contractor will be required to complete a study that determines the value of Canada’s Cellular and PCS spectrum in the radio frequency bands 824.040 MHz to 848.970 MHz, 869.040 MHz to 893.970 MHz and 1850 MHz to 1990 MHz.

Industry Canada will take this value into consideration when it determines an annual fee for the renewal of Cellular and PCS spectrum licences.

Industry Canada is aware that there are challenges when trying to determine the underlying value of spectrum. The study should give consideration to, but not be limited by, the following: different frequency bands, different geographic areas, prevailing economic conditions, method used to assign spectrum.

The study should include a description of the proposed approach, data sources and methodology used as well as the rationale for the selection thereof. In so doing, a comparative review of differing valuation practices that could have been used and the rationale for rejecting them should be provided.

The study should assess the relevance of auction results for similar spectrum, both national and international, as well as other relevant market transactions that might be used.

What is the value of spectrum. This is not an easy question. And by that we mean that it’s not an easy question. It’s easy enough to come up with any aswer 42! but, like life the universe and everything else, it’s sometimes more important to be sure we really know what the question is.

How much could the government charge for spectrum?
How much should the government charge for spectrum?
Why should the government effectively taxing spectrum, effectively a tax on the very medium of desperately needed digital infrastructure?
What do they plan to do with the money?
How does this relate to Canada’s would-be digital strategy supposedly being talked up by Clement and others?

So go ahead and put in your offer to tell the govenment what you think about that. (we have half a mind to). But, be warned your answer can’t cost the feds more than $150,000 CAD.

LINK: Study to determine the value of Cellular and Personal Communications Services (PCS) spectrum in Canada