Fans of the “hands-off” approach to broadband oversight finally have a country where they can see a deregulated free marketplace in action, where consumers theoretically pick the winners and losers and where demand governs the kinds of services consumers and businesses can get from their providers.

That country is the Philippines, which has taken the libertarian free market approach to Internet access in a dramatic leap away from the authoritarian Marcos era of the 1980s.

The Deregulation “Miracle”

Until 1995, the Philippines Long Distance Telephone Company (PLDT) maintained a 60-year plus government-sanctioned monopoly on telecommunications services. Its performance was less than compelling. Establishing landline service took up to 10 years on a lengthy waiting list. Getting a phone line was the first problem, making sure it worked consistently was another. Just over 10 years after the United States formally broke up AT&T and the Bell System, the government in Manila approved RA 7925 – the Public Telecommunications Policy Act of 1995, breaking PLDT’s monopoly and establishing a level playing ground for each of 11 regions across the country and its many islands in which private companies could compete with PLDT for customers.

To attract investment and competition, the government declared all value-added services like Internet access deregulated and guaranteed the complete privatization of all government telecom facilities no later than 1998. It also initially limited the number of companies that could compete against PLDT in each region to two new entrants. The government felt that would be necessary to attract competitors that knew they would have to quickly invest millions, if not billions, to build telecom infrastructure in the Philippines. It would be hard to make a case for investment in a region where a half-dozen companies all engaged in a price war fighting for customers while stringing new telephone lines and building cell towers.

To prevent cherry-picking only the wealthiest areas of the country, the government declared its desire for a privately funded nationwide telecom network and used the 11 regions, combining urban and rural areas in each, to get it. Competitors were required to support at least 300,000 landlines and 400,000 cellular lines in each region. That assured new networks could not simply be built in urban areas, bypassing smaller communities. After building their networks, companies largely operated on their own in a mostly-free deregulated market, slightly overseen by the National Telecommunications Commission (NTC) — the Philippines equivalent of the FCC.

The early years of telecom deregulation seemed promising. PLDT, much like AT&T in the United States, kept the lion’s share of customers (67.24%) after deregulation took effect, but new competitors quickly captured one-third of the market. But with lax regulation and oversight, some of the Philippines’ most powerful families, many benefiting under years of the Marcos dictatorship, managed to gain influence in the newly competitive Philippines telecom business. In the United States, telecom competition meant a choice between Sprint, MCI, AT&T or others. In the Philippines, you dealt with one or two of nine powerful family owned conglomerates, each operating with a foreign-owned telecom partner. It would be like choosing between companies owned by the Rockefellers, the Astors, the Carnegies, or the Morgans.

The NTC remained more “hands-off” than the FCC, avoiding significant involvement in critical interconnection issues — how competing telephone companies handle calls from subscribers of a competing provider. That was last an issue in the United States in the early 1900s, where rare independent competitors to the rapidly consolidating Bell System faced a telecom giant that initially refused to handle calls from customers of other companies. American regulators eventually demanded interconnection policies that guaranteed customers could reach any other telephone customer, regardless of what company handled their service. In the Philippines, the NTC eventually mandated less-demanding access, allowing companies to charge long distance rates to reach customers of other companies. In the 1990s, it was not uncommon to find businesses maintaining at least two telephone lines with different companies to escape long distance expenses and stay accessible to all of their potential customers.

PLDT initially fought the opening of the marketplace but benefited handsomely from it once it took effect. The company got away with setting sky-high interconnection rates to connect calls from other smaller providers to its customers. It also made access to its network a minefield of bureaucracy and often required competitors to sign unfair revenue sharing agreements.

It is Cheaper to Buy Out the Competition Instead of Competing With It

(Image Courtesy: Mary Grace Mirandilla-Santos/LIRNEasia)

The investment community eventually balked at the cost of constructing competing telecommunications networks, especially after the dot.com crash in 2000, and a drumbeat for industry consolidation through mergers and acquisitions quickly grew too loud to ignore. Investors fumed over the amount of money being spent by providers to meet their service obligations in the 11 subdivided regions. Instead of building redundant or competing infrastructure, allowing competitors to merge would cut costs and enhance investor return. The NTC let the marketplace decide, as did the government, and it led to a frenzy of industry consolidation that ran far beyond what the FCC and American Justice Department would ever tolerate.

In 2011, the government backed a colossal merger that brought together the wireless networks of Pilipino Telephone Corporation, PLDT, and Smart under the PLDT brand. The three former competitors became one and controlled 66.3% of the Philippine’s wireless customers. The merger was comparable to allowing Verizon to buy out Sprint.

Additional mergers in response to the super-sized PLDT rapidly reduced the competitiveness of Philippine’s telecommunications marketplace to a duopoly. Just two companies — PLDT, Globe, and their respective house brands — dominate landline, DSL, cable, and wireless telecommunications service in the Philippines. The investment community celebrated the deal’s approval as a lucrative goldmine of future revenue gains from a less competitive market.

Philippine Broadband: Hey, It’s at Least Moderately Better Than Afghanistan

(Image courtesy: Mary Grace Mirandilla-Santos/LIRNEasia)

Broadband performance, under any measure other than financial success, has proved abysmal for Philippine consumers and businesses. The country’s broadband speeds are among the worst in the world, only beating Afghanistan in many speed tests. Look the other way–oversight led to a bribery scandal in 2007 that threatened to bring down the government. Officials exploring the development of a National Broadband Network were accused of soliciting kickbacks from Chinese equipment vendor ZTE, which would have been responsible for supplying equipment for the project. The government canceled the project as the scandal widened and some of the principals left the country or in at least one case were kidnapped.

Eight years later, broadband in the Philippines would be considered a North American nightmare. The free market approach has led to free-flowing profits and a profound lack of marketplace competition, with broadband ripoffs and broken promises rampant across the country.

Although both PLDT and Globe Telecom are spending large sums on infrastructure, much of it benefits their very profitable wireless networks and business customers. Despite the investments, residential customers are stuck with some of the world’s worst broadband speeds and performance.

An independent Quality of Service test revealed the bad news all around:

The findings of the Philippine QoSE tests were expected, but nevertheless still disappointing.

The best performing among the three ISPs delivered only 21% of actual versus advertised speed on average. This same ISP also offered at least 256kbps download speed (generally accepted definition of broadband) only 67% of the whole time it was tested, falling short of the required 80% service reliability.

The Broadband Commission defines the core concepts of broadband as an “always-on service” with high capacity “able to carry lots of data per second.” While there is no official definition of broadband locally, the Philippine Digital Strategy 2011-2016 defines broadband Internet service as 2Mbps download speed.

Finally, like the last nail in the coffin, Philippine ISPs performed the worst in terms of value for money when compared to select providers in South Asia and Southeast Asia. The highest value given by any of the three Philippine ISPs tested was a measly 22kbps per US dollar. This figure is too low when compared to similar mobile broadband ISPs that offer 173kbps per dollar in Jakarta, Indonesia and 445kbps per dollar in Colombo, Sri Lanka.

These results have huge implications on truth in advertising, consumer welfare, and the need for appropriate regulation.

My DSL Service is So Bad I Prefer 3GB Usage-Capped Slow Wireless Instead

Legarda

Home DSL broadband is so bad that customers have increasingly dropped service in favor of tightly managed wireless service. Companies report DSL customer losses over the past few years, with no end in sight.

The telecom regulator has generally just shrugged its shoulders at the situation, suggesting competition between equally poor providers will somehow resolve the problem. That view is applauded by service providers who claim the Internet is “just a value-added service” not essential to basic living needs. But consumer groups wonder why providers are allowed to make false advertising claims about the speed of their service with no repercussions. A range of position papers appealing to the government to create a meaningful minimum broadband speed have been introduced and some are being pushed by members of the Philippine Senate.

Senator Loren Legarda joined scores of other frustrated customers complaining about unreliable and expensive Internet in the country. In a 2014 hearing Legarda complained she had once again lost her DSL Internet connection in her office and her wireless connection was so slow it was unusable.

“As we speak now, there is no Internet connection in my office,” Legarda said. “I received a message this morning from my staff on my way here because I may be e-mailing, etc. And for someone whose deadline was yesterday, I always want things done fast and I’m sure many of you want that efficiency too to serve our people better.”

[flv]http://www.phillipdampier.com/video/ANC Poor Broadband Internet 5-14.flv[/flv]

ANC aired this story about Sen. Legarda’s broadband problems and how Philippines’ providers oversell their networks back in 2014. (4:56)

We Oversold Our Networks So Sue Us, Except You Can’t

Providers blame the problem on oversold networks that attempt to manage too many paying customers on an inadequate network. In other words, they blame themselves with little fear any regulator will create problems for them.

Wireless service is no panacea either. Customers in the Philippines face draconian “fair use policies” on so-called “unlimited plans” that leave them throttled after 1GB of usage per day or 3GB of usage per month, whichever happens first. Providers suggest the policy is a benefit, promising them a better user experience. Besides, they suggest, even those that run into the speed throttle can still browse the Internet, albeit at as speed resembling dial-up:

Your internet speed will slow down if you use up 1GB of data for the day, or accumulate 3GB of data usage for the month.

If you hit the 1GB/day threshold, you’ll experience slower speed, but no worries because as we mentioned above, you can still surf! You’ll move up to normal speed at midnight. If you hit the 3GB/month threshold, your speed will move up to normal speed on the next calendar month (not based on bill cycle).

With a stifling usage allowance, shouldn’t providers in the Philippines be offering better speeds?

Say Hello to the “Promo Pack” – Your Net Neutrality Nightmare Come True

Remember the scary ads from Net Neutrality proponents promising a future of Internet add-ons that would charge you to surf theme-based websites without facing network slowdowns or stingy usage caps if Net Neutrality protections were not forthcoming? In the Philippines, the nightmare came true. Mobile providers sell added cost “promo packs” that bundle extra throttle-free usage with theme-based apps. A package with Spotify runs about $6.50US a month and includes 1GB of usage. Anyone can buy a Spotify premium membership in the Philippines for around $4.37US without the add-on. But even worse are app-based promo packs that bundle free-to-download-and-use apps in the U.S. with special designated usage allowances.

Want to use Google Maps on your wireless provider? A “promo pack” including it costs around $2.17 a month and includes 300MB of usage. That money doesn’t go to Google — it stays in the pocket of the provider – Globe Networks. Twitter will set you back $4.37US a month and includes 600MB of usage, which seems odd for a short message service when contrasted with an identically-priced promo pack for Facebook, that needs the extra usage allowance more than Twitter likely would. But then they also get you for Facebook Messenger, which costs an extra $2.17US per month and comes with its own usage allowance — 300MB.

“What If” actually “Is” in the Philippines.

While segmenting out popular mobile apps for special treatment, Philippine mobile providers have also taken Verizon and AT&T’s lead, pushing plans like myLIFESTYLE that bundle unlimited text and phone calls with expensive data plans.

Lifestyle Promo Packs:

Extra Add-ons:

The Philippines Should Regulate Under the American Example vs. The Philippines Should Not Regulate Under the American Example (It’s Obama’s Fault)

Providers in the Philippines have learned a lot from America’s telecommunications lobbyists. Their advocacy campaigns revolve around the theme that the United States has the best wireless networks in the world, developed under a largely hands-off regulatory philosophy that the Philippine government should follow.

The government and regulators largely acquiesced to that campaign until this year, when that idea came back to haunt providers. Earlier this year, the Obama Administration and the FCC began taking a more hands-on approach to telecom regulation after recognizing the marketplace is not as competitive as providers suggest. Strong Net Neutrality enforcement, limits on mergers and acquisitions and strong signals marketplace abuses would no longer be tolerated are now being pushed in Washington by the White House and the Federal Communications Commission. Providers in the Philippines no longer advocate following the American model, but it may now be too late.

The NTC is close to issuing new minimum broadband speed and performance standards and is now listening to Filipino consumers that launched Democracy.net.ph to fight usage caps in the Philippines back in 2011. The NTC may soon require providers advertise average speeds and performance, not “up to” speeds nobody actually receives. Those getting poor service would be entitled to refunds or rebates.

That could be the first step towards a more activist NTC that may have learned the lesson that listening to the broken promises of better service through deregulation has resulted in some of the worst broadband performance the world has to offer. The Philippines took the advocacy arguments of the deregulation crowd and doubled down, not only allowing providers to lie and distort in their advertising, but also permitting massive industry consolidation reducing the choice for most Filipinos to just two providers for almost all telecommunications services. The government looked the other way as corruption turned into a scandal and today it is left with two very powerful conglomerates that deliver third world Internet access while pocketing the generous proceeds.

A Better Way to Better Broadband

A deregulated, free market only works where healthy competition exists. Too few players always leads to reduced innovation, poorer service at higher prices, and a corporate fortress deterring would-be competitors that are unlikely to be able to survive in a fair, competitive fight. For the Philippines (and by extension the United States) to fully benefit from healthy competition, large conglomerates must be broken up and further mergers must be prevented above all else. Until sufficient competition can self-regulate the marketplace, strong oversight is necessary to protect consumers from the abuses that always come from monopolies and duopolies. Charging wireless customers for free apps and suggesting 3GB of usage is equal to unlimited broadband are two places to start cracking down, quickly followed by an investigation into where investment dollars are being spent and for whose benefit. It seems like customers are not reaping any rewards in return for high-priced service.

The Philippine government should also continue exploring a National Broadband Network strategy that puts the country’s broadband needs above the profit motivations of the current duopoly. Governments build roads and bridges, airports and railways. Broadband is another infrastructure project that needs to be developed in the public interest. If private companies want to be a part of that effort, that is wonderful. But they should not be dictating the terms or holding the country back from what may be the biggest scandal of all — broadband that barely performs better than what the Taliban can get these days in Helmand province.

Phillip Dampier

Welcome to 2015!

This is the seventh year Stop the Cap! has fought for better broadband across North America and beyond. Whether your provider is Comcast, Time Warner Cable, Rogers, Bell, AT&T, Verizon or a (dwindling) number of other cable and telephone companies, there is plenty of room for improvement.

When we began in the summer of 2008, Frontier Communications was contemplating a usage cap of just 5GB a month on their broadband service. A year later Time Warner Cable market tested caps as high as 40GB a month. For almost as long as we’ve existed, Comcast has believed 250GB a month was all most customers ever needed. Rogers’ most popular Internet package today offers 60GB a month, despite the fact Canadians on average watch more online video than anyone else. AT&T thinks 150GB a month is fine for DSL and 250GB is all you’d need as a U-verse customer. Verizon doesn’t see a need for limits on either its DSL or fiber optic networks. Neither does Cablevision.

Usage caps and so-called “usage-based billing” continue to be one of the most under-reported stories in the tech press. Touted as “fair pricing,” these plans are in fact little more than profit-padding for a service that already earns companies as much as 90% gross margin. There is nothing fair about usage-based billing in North America. Customers face the same prices they have always paid for unlimited service, but now endure an arbitrary usage allowance that usually includes a stiff overlimit fee. Those providers charging usage pricing do not offer the fastest service, have not made significant improvements above and beyond other providers that still charge flat rate prices, and frequently also charge excessive modem rental fees.

The duopoly most Americans have for broadband service has become quite fat and happy collecting ever-increasing amounts of money for service that only seems to improve after an upstart competitor like Google arrives ready to offer better service at a lower price. Customers in Kansas City, Austin, and a handful of other communities are getting the best upgrades and are empowered to negotiate a lower price for service. The rest of the country is not so lucky. A handful of often-under capitalized fiber competitors have arrived in some areas, but their market share generally remains a fraction of what the cable and phone companies have locked up.

We have always believed broadband was destined to become the next must-have utility service, following clean water, electricity, gas and some form of telephone service. Unfortunately, Washington policymakers continue to treat Internet access as an optional extra, allowing one or two companies to dominate access in most communities. Policymakers and regulators have done very little to protect consumers from the effects of marketplace concentration, allowing cable and phone companies to merge and raise prices, remain uncommitted to protecting the Open Internet with strong Net Neutrality protections, and not taking the effects of usage caps seriously.

One of the most effective ways a community can combat bad service and high prices is to support launching its own public broadband network. Throughout the United States, local town and counties enduring “good enough for you” broadband (or no service at all) are constructing their own fiber optic networks to better meet the realities of the 21st century digital economy. They face industry-funded opposition in at least 20 states where lawmakers have banned or severely curtailed these networks to protect private telecom giants from the effects of serious competition.

In 2015, Stop the Cap! will continue to fight for consumers looking for a better deal:

• We continue to oppose industry consolidation. Mergers and buyouts benefit executives and shareholders. They almost never benefit customers who soon find rate increases, fewer choices, and often worse service as a result. Connecticut residents know that first hand enduring Frontier Communications’ recent bungled transition from AT&T service. Customers that dislike Time Warner Cable will likely loathe Comcast if that merger wins regulator approval. AT&T’s buyout of DirecTV leaves one less competitive choice for customers living in AT&T’s service areas looking for an alternative to U-verse television. Imagine if the government had approved AT&T’s attempted buyout of T-Mobile, the one wireless carrier now willing to throw a monkey-wrench into the current dominance of almost-identical expensive wireless service plans from AT&T and Verizon.
• Usage caps and consumption billing remain unjustified, particularly for wired broadband. Despite industry claims that usage caps and usage billing stimulate investment, in most cases the costs of delivering broadband service and the amounts companies invest in network upgrades continue their relentless decline on a per customer basis. Usage billing is no prescription for congestion problems either. Most congestion problems occur during peak usage levels — when light and heavy users alike are most likely to be online. A truly fair usage pricing scheme would charge a fair price for actual usage and nothing else. But such a pricing scheme would likely cut broadband bills and profits. So providers offer pre-determined compulsory usage allowances at current prices instead, and do not offer a flat rate option or rollover unused usage to a future month. As a result, customers often pay more for less service and constantly have to check their usage to make sure they do not get an unexpected surprise on their bill.
• Strong Net Neutrality protection is the best guarantee of preserving the Internet as it exists today – where success or failure of an online venture is based on what it offers customers, not on the size of its bank account. A nationwide end to laws restricting the development and expansion of community broadband is also essential to give communities self-determination of their broadband future.
• We will continue to educate consumers on how to negotiate a better deal with your provider and avoid expensive surcharges like modem rental fees. We will also continue to enlighten you about the pervasive influence of Big Telecom money on non-profits, state and federal governments, and researchers that support the various agendas of some of the largest telecom corporations in the country.

Broadband is improving at an incredible pace around the world, but back home prices continue to rise while Internet speed improvements are often met by usage cap road bumps. Internet affordability remains as much of a problem as rural broadband access. The more you know, the more effective you can argue for a change in telecom policies, where the public interest is better-balanced against corporate profits and duopoly prices.

Thank you for being a part of our efforts to make things better.

Canadian investment analysts are recommending that Canada’s telecom giant Bell (BCE) should explore buying out Bell Aliant, Inc. the largest telephone company in the Maritimes, to further consolidate Canada’s telecommunications marketplace.

Bell already effectively controls the phone company serving provinces east of Quebec through its 44 percent stake in the venture. Picking up the rest through a takeover would make financial sense, said Maher Taghi, a telecom analyst at Canada’s Desjardins Securities.

The Globe and Mail reports Yaghi explained in a note to investors a buyout would boost overall free cash flow for Bell (BCE), primarily from the increased revenue paid by customers for phone, television, and Internet service.

Bell Aliant has been one of Canada’s most conservative telecom companies serving the country’s smallest provinces in Atlantic Canada, as well as parts of rural Ontario under the NorthernTel brand and Télébec, which serves rural Quebec.

Unlike Bell (BCE), Bell Aliant has aggressively deployed fiber to the home service in New Brunswick, Prince Edward Island, and Nova Scotia to stem landline losses. Bell Aliant’s FiberOP customers avoid stingy usage caps that are pervasive across the rest of Canada. Its fiber network delivers strong competition to cable operators.

Bell (BCE) is already a major player in Canadian telecommunications, both with its landline operation and Fibe — mostly a fiber-to-the-neighborhood service — wireless phone and broadband, owner of more than two dozen specialty cable networks, a satellite TV service, owner of the CTV television network, new owner of Astral Media, and a few dozen radio stations across Canada. With this level of media concentration, Bell (BCE) would have a tough time trying to buy any additional media assets, but with its current de facto control, Bell would likely have little regulatory scrutiny merging Bell Aliant into its existing operations.

[flv]http://www.phillipdampier.com/video/Bell Aliant FiberOP Intro Video 1-2014.flv[/flv]

Bell Aliant’s FiberOP introductory video explains the network and its features for Atlantic Canada. (2:20)

The three companies that control 90 percent of Canada’s cell phone marketplace have set what they argue is ‘cut-throat’ competition aside to team up in a multi-million dollar lobbying campaign to discourage Verizon Wireless from entering the country.

Bell, Rogers, and Telus have maintained what critics charge is a “three-headed oligopoly” in the wireless business for years, leading to findings from the OECD that Canada is among the ten most expensive countries in the world for wireless service in almost every category and has among the highest roaming rates in the world.

Americans also pay high cell phone prices, and customers of both countries will find somewhat comparable pricing when comparing prices north or south of Lake Ontario. A shopper in Niagara Falls, N.Y. can find the Samsung Galaxy S4 from a Verizon reseller for $120 with a two-year contract. A shared data service plan runs as little as $80 a month for 500MB of data and unlimited domestic calling and global texting. Travel across the Rainbow Bridge to Niagara Falls, Ontario, walk into a Rogers store and the same phone runs $199 with a two-year contract (most Canadian carriers used to offer three-year contracts until the government banned them earlier this year) and a service plan running $80 a month offering the same 500MB of data and unlimited domestic calling and texting. Rogers charges extra if customers want to text a customer outside of Canada, however.

Verizon is no discount carrier. Verizon management has repeatedly stressed it offers premium service and coverage and can charge commensurately higher prices for access to that network. So the idea that Verizon’s interest in entering Canada is to launch a vicious price war is suspect, according to many telecommunications analysts.

Keep Verizon out of Canada at all costs!

They are coming.

In June, the Globe and Mail reported Verizon had shown serious interest in acquiring Canadian cellular upstart Wind Mobile with an early bid of $700 million. Wind Mobile, one of the three significant new “no-contract” entrants vying for a piece of the country’s cell phone market, has limped along since opening for business in 2009, unable to attract much interest from customers concerned about coverage gaps and the poor choice of mobile devices.

More recently, Wind Mobile’s new owner — the Russian mobile giant Vimpelcom — has expressed an interest in selling off the carrier because it cannot gain traction against the biggest three, which also control 85 percent of mobile wireless spectrum.

News that Verizon had taken an interest in the carrier leveled shock waves across the Canadian financial markets. Shares in the three largest telecom giants fell sharply on the news. Earlier this month, Bell CEO George Cope reported that Bell, Telus and Rogers have taken a $15-billion cumulative hit on the capital markets since Verizon hinted interest in Wind Mobile.

[flv width=”480″ height=”290″]http://www.phillipdampier.com/video/CBC Verizon takes aim at telecom Big 3 with possible Wind Mobile bid 8-19-13.flv[/flv]

The CBC reported earlier this summer that Verizon Wireless was interested in acquiring the 600,000 customers of independent wireless provider Wind Mobile, which has an insignificant share of the Canadian wireless market. (2 minutes)

Spending a few million, or even a billion dollars, to keep Verizon south of the Canadian-U.S. border is well worth it to the three big players who have launched an expensive campaign to block the proposed transaction and are willing to pay premium prices to keep struggling carriers from being sold to deep-pocketed American telecom companies.

Telus had already done its part, attempting to scoop up another scrappy upstart carrier that wanted out of the wireless business. But the Canadian government rejected Telus’ proposed acquisition of Mobilicity, claiming it would harm efforts to expand Canadian wireless competition. Not to be deterred, Rogers is now attempting a cleverly structured deal to acquire Wind Mobile out from under Verizon with a proposed buyout worth more than $1 billion.

To avoid the anticipated rejection of the deal by Canadian regulators on competition grounds, Rogers has reportedly joined forces with Toronto-based private equity firm Birch Hill Partners that would make that firm the owners-in-name. Although Rogers wouldn’t get a direct equity stake in Wind, it would finance a good part of the deal and win access and control of Wind’s mobile spectrum for its own network. More importantly, it could keep Verizon out of Canada.

“The government is handing out loopholes to Verizon to beg them into Canada”

Cell phone companies in Canada are particularly angry that the government has set aside certain spectrum and guaranteed access for upstart providers to successfully establish themselves without having to outbid the cash-rich big three for wireless frequencies or have to build a nationwide network from scratch. Bell, Rogers and Telus have consistently opposed spectrum set-asides for small carriers, deeming them “unfair.” They argue Canadians’ voracious needs for more wireless service are unending, and it would be unfair not to sell the spectrum to benefit their larger customer bases. But hearing that Verizon, a company larger than Bell, Rogers, and Telus combined, could get preferential treatment and spectrum to enter the country has them boiling mad.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/CBC Telecom debate 8-19-13.flv[/flv]

Bell’s CEO George Cope appeared on “The Lang and O’Leary Exchange” to debate the fairness of Verizon’s possible entry into Canada’s wireless market. Cope argues Verizon is getting special favors. (9 minutes)

Cope

The idea of luring a company to move or begin offering service in a barely competitive marketplace is hardly new. Cities have offered preferential policies to airlines to fly in and out of particular cities, local governments have offered tax abatements to get companies to set up shop, and providing exemptions for zoning and infrastructure have been familiar to telecommunications companies for decades.

In 1880, the National Bell Telephone Company had incorporated, through an Act of Parliament, the Bell Telephone Company of Canada (today also known as BCE), which was given the right to build telephone lines over and along all public property and rights-of-way without compensation to the public or former owners. Through a series of mergers and acquisitions, Bell would later become the dominant monopoly provider of telephone service across much of eastern Canada.

When the phone companies were handed wireless spectrum to launch their wireless businesses in the 1980s, they didn’t have anything to complain about either.

None of that history impressed Bell’s current CEO George Cope, who took to the airwaves to complain Verizon was being given preferential treatment:

• Verizon could bid on two blocks of Canadian spectrum set aside for new entrants to the market in auction later this year. Because the big three Canadian firms are not permitted to bid on these blocks, they are likely to be sold at a lower price.
• Verizon would not have to build its own networks to remote or rural communities, but would be able to piggyback on existing networks.
• Verizon can bid to acquire small Canadian companies such as Mobilicity or Wind, but Bell, Telus and Rogers are forbidden from bidding on them.

“A company of this size certainly doesn’t need handouts from Canadians or special regulatory advantages over Canadian companies,” Bell said in a full-page newspaper ad. “But that is exactly what they get in the new federal wireless regulations. We’re ready to compete head to head, but it has to be a level playing field,” Cope said in a TV interview, echoing Rogers CEO who also called for a “level playing field.”

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/CBC Is Verizon really the bogeyman Canada’s telecom giants claim 8-19-13.flv[/flv]

Bell, Telus, and Rogers have launched a lobbying campaign designed to make life difficult for Verizon Wireless if it chooses to enter Canada. The CBC reports Verizon will be able to bid on more spectrum than Canadian carriers and will have the right to roam on Canada’s incumbent wireless networks. (2 minutes)

Industry Minister Moore

Telus went further, claiming Verizon’s entry into Canada would result in a “bloodbath” for Canadian workers, laid off by the three largest Canadian providers to cut costs to better compete with Verizon.

But Cope said at least one Canadian carrier won’t be able to compete at all, because preferential treatment for wireless spectrum will result in at least one of the big three to lose at a forthcoming spectrum auction, guaranteeing degraded wireless broadband speeds and worse service.

The three companies have found little sympathy in Ottawa, particularly from Industry Minister James Moore, now on a road tour across Canada to promote the government’s wireless competition policies. He called the big three’s loud campaign self-serving and announced a new website sponsored by the Conservative Party of Canada to prove it.

“I think that the public instinctively knows that when they have more choices that prices go down and more competition they’re well served by that,” he told CBC News in Vancouver on Monday. “The noise that we’re hearing is about you know companies trying to protect their company’s interest. Our job as a government is larger than that, our job is to serve the public interest and make sure that the public is served in this so that’s one of the reasons why I’m pushing back a little bit.”

Industry Minister James Moore appeared on CBC Radio this morning to contest the wireless industry’s claims that Verizon is getting special treatment and will bring unfair competition to the Canadian wireless market. (7 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

Oppose Verizon Wireless. Do it for Canada!

But the wireless companies show no signs of backing down and have turned towards appealing to Canadian nationalism and fairness.

“The U.S. government is not giving Canadian wireless carriers any special access to the U.S. market,” says a website launched by the big three cell providers to drum up support for a “level playing field.” “Then why is it that our own government is giving American companies preferential treatment over our own companies?”

This week, a Reuters report citing unnamed sources suggests Bell, Telus, and Rogers are about to target Verizon directly with a new campaign warning Canadians the American giant has been implicated in allowing the U.S. government open access to network and customer data, which would represent a profound privacy threat to Canadian customers.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Bell Rogers Telus Ad 8-13.flv[/flv]

Bell, Telus, and Rogers paid to produce this ad calling on Canadians to protest unfair competition from an American wireless company.  (1 minute)

So far, Canadians’ hatred of their telecommunications providers has trumped the companies’ public relations and scare tactics. The Conservative government in Ottawa is winning support for its wireless competition war, even from unlikely places.

“Someone mark the date,” Tweeted one Halifax woman not inclined to vote Conservative. “Stephen Harper has done something I mostly support.”

“Eat it Telus/Bell/Rogers,” wrote a Calgary man fed up with the lack of competition in Canadian wireless.

John Lawford, executive director of the Public Interest Advocacy Centre in Ottawa, says opposition from the big three telecom companies is obvious because they don’t want to face a fourth, powerful competitor.

“They should be scared because chances are they’re going to have more competition in the Canadian market if Verizon comes in and they are going to have to lower their prices and compete harder,” Lawford told CBC News. “It’s pretty rich of them to be talking about unfairness” when they already control 90 per cent of Canadian spectrum, he added.

Iain Grant of the SeaBoard Group, a telecommunications consultancy, said government policies to open up more competition are designed to shake things up.

“[The new rules weren’t] meant to be a level playing field,” said Grant. “[They were] meant to give a leg up [to new competitors].”

“To talk of loopholes, as some do, is to not understand that the same companies who complain most loudly about loopholes in 2013 were the recipients of even greater public largesse in 1985 when the government gifted their initial spectrum as an incentive to build a wireless business in Canada,” said Grant.

Few companies have taken on the Canadian big three telecom providers because of their enormous market share, at least inside Canada.

Nine out of ten Canadian wireless users are subscribed to Bell, Telus or Rogers. Trying to convince a banker to extend capital loans to effectively confront a wireless oligopoly in a country with an enormous expanse of land but not people and find enough airwaves among the 15% not controlled by the big three is an uphill battle.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/CBC Wireless war heats up 8-19-13.flv[/flv]

CBC reports Industry Minister Moore believes increasing competition is the best way to cut Canadian cell phone bills. Regardless of whether Verizon enters Canada, the current government will continue to push for more competition. Even the threat of Verizon coming to Canada has already reduced prices. (2 minutes)

Why does Verizon want to enter Canada?

Analysts suspect Verizon’s interest in Canada has little to do with wooing Canadians to Big Red. Many suspect Verizon’s true interest is to make life easier for its traveling American customers who head north for business or pleasure.

Chief among the possible benefits is the elimination of roaming charges for Verizon customers.

“Verizon’s customers come into the country every day through all the bridges and ports of entries and they want to roam where they want to roam, whether that’s fishing in Saskatchewan or hunting in northern Ontario or wherever,” said Grant.

There are other apparent impediments that could limit the usefulness of Wind’s mobile network to Verizon. In addition to only operating in the largest Canadian cities, Wind’s infrastructure is built by Chinese firm Huawei and is not compatible with Verizon’s technology.

Huawei has been the subject of significant controversy because of its reported ties to the Chinese military. Fears that data could be intercepted by the Chinese government have kept many North American firms from doing business with the company.

Verizon also lacks bundling options for Canadian customers. The biggest three Canadian providers can offer telephone, television, and wired broadband service to their customers. Verizon can only offer wireless service.

Verizon has second thoughts

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/CBC Verizon doubts 8-15-13.flv[/flv]

CBC reports Verizon may be having second thoughts about entering Canada. Verizon may not be interested in entering a political battle to win licenses to provide service and may want to acquire its own spectrum before considering buying either Wind Mobile or another competitor like Mobilicity. (2 minutes)