Anthony Lacavera delivers keynote speech at 2011 Canadian Telecom Summit
- June 2, 2011
Telecom Summit Speech – Anthony Lacavera
June 2, 2011
Check against delivery
Good morning ladies and gentlemen,
I want to talk to you today about wireless competition in Canada. Not through the lens of rose coloured glasses. Not the story you’ve heard. The one of Globalive, a small, born-in-Canada company that dreamed big, fought hard and planned to launch a new wireless offering among the incumbents to shake-up the entrenched oligopoly.
Not that story.
Today, I want to talk to you about the other story. About the reality of being a new entrant in this market.
The last two years haven’t exactly been a Cinderella tale for us.
It has been a battleground, laden with accusations about our ‘Canadian-ness’, regulatory game-playing and wrought with tactics to prevent our success.
Today, I am here to tell that story because it is time for competition to work in this country. It’s time for the fear mongering about foreign capital to stop and for the incumbents to focus on developing a thriving industry that can effectively compete on the world stage.
We started out, in 2008, vying for the opportunity to become a new player in a sector dominated by regional cable and telecom monopolies for the past 30 years.
There was good reason and smart policy decision-making that led to the opening of the spectrum in that year.
At the time, increasingly bloated conglomerates were offering poor service and product choice to consumers who were realizing how much they had been overpaying for such mediocrity.
At 2.2 times higher rates than our American neighbours, Canadians were just plain fed up. And finally, after a decade of falling to dead last on the OECD wireless penetration ranking and after a pointed report from the telecom review panel, the federal government made the decision to open up the spectrum to new entrants.
From the outset, it looked like a promising decision. One in which new companies would finally compete to break up the oligopoly for the benefit of consumers.
The promise was simple. Competition would equal lower prices, better service and more products and features.
And it went deeper than that. The auction marked a starting point for more advanced innovation that would improve Canada’s global competitiveness and act as a catalyst for some much needed regulatory changes.
Competition was meant to catapult us into the 21st century. To force the sector to wake up from its hibernation and start innovating at a pace consistent with the rest of the developed world.
Instead, right out of the gate, the incumbents did the polar opposite of innovate.
While our introduction to the market was welcomed by consumers, the incumbents launched an early campaign to question our Canadian-ness. A narrative that was seeded because we looked beyond our borders to find a strategic investor to help us bring global scale and operating experience in wireless to Canada.
Some of you may have read about a bit about that!
What most Canadians don’t realize is that many Canadian telecom carriers started their businesses with access to foreign capital, including Bell and TELUS.
And yet now, those very companies have raised issue with foreign investment, even though that is exactly the way in which our country’s legacy telecom networks were built.
The reality is that in order to form an effective, lasting, competitive alternative, we must access an extraordinary amount of capital
And that capital was simply not available on Canadian soil.
Unlike mining and resources, the Canadian capital markets for telecommunications are very small. More importantly, the business interests of our Canadian banks with the incumbents make it virtually impossible to access Canadian capital to the scale that is required.
We just can’t have it both ways.
If we want full, real, telecom competition in Canada, we have to be able to fund it.
If we can’t fund it in our own backyard, then we have to allow for foreign capital, we have to allow the free market to work.
Some believe that accessing foreign capital will stop Canada from producing our own indigenous content, and forever compromise Canadian culture and sovereignty.
I will argue passionately that liberalizing foreign ownership restrictions and making the global capital markets available to smaller telecom infrastructure players does not pose a risk to either culture or sovereignty. It enables new entrants to make investments necessary to build networks and effectively compete. This competition is absolutely vital if Canadians are going to continue to enjoy reduced prices, increased services, better products and features – the hallmark consumer benefits of more market choice.
Instead of us having such a protectionist defensive mentality, why not create and produce more content in Canada and export it? In the next generation of telecommunications, content is not just king, content is fluid.
As you’ve been hearing over the past few days, the YouTube generation does not simply watch conventional TV, they’re watching TV online and on mobile and they digest content in multiple formats. Let’s create policy to accelerate the growth of Canada’s content creation industries, and take aim for a leadership position in the newly emerging Internet and mobile content distribution formats.
What we should actually be concerned about is the concentration of ownership of legacy media assets in Canada. Canadian telecom and cable companies are rapidly acquiring legacy content and media companies – Rogers acquired CityTV properties, Shaw has purchased CanWest, and Bell has bought the TV assets of CTV/GlobeMedia.
Where we once had a variety of voices; we are increasingly living in a Canada where our content distributors own our content.
Those same content distributors will find ways to use their distribution pipelines to steer customers towards content they control and away from content controlled by their competitors.
I can agree with my friends at Rogers when they say that it is time to level the playing field. But leveling the playing field does not mean entrenching the competitive advantages already enjoyed by a few very dominant players.
In this new world, net neutrality and an open internet will be more critical than ever. Canada risks going against the grain of net-neutrality if we allow telecom giants the ability to force and control access to their proprietary content.
With the speed of change in our society, how can government and regulatory policies that were structured for yesterday’s realities keep up with today’s needs?
Just one month ago, Konrad von Finckenstein, chairman of the CRTC asked if it would make sense to form a single comprehensive Act to govern all communications.
The simple answer? No.
We need to ditch the unified Act idea as it is unlikely that there will ever be any positive synergies for consumers from a unified Act.
Content and carriage are distinct. We need to focus more on making sure Canadian content reaches consumers than on who owns the pipelines delivering it to them.
We need to differentiate between companies like ours building content agnostic infrastructure from companies creating content or deliberately making choices about what content will reach consumers.
Ultimately, we want the biggest pipes at the lowest possible cost – the critical issue for Canadian culture is what is moving through our pipes, not the sources of capital used to build them.
Infrastructure companies should be able to access the global capital markets without the ability to control or influence the content that is running over the infrastructure.
And mobile operators should be able to build next generation networks with a globally competitive cost of capital and broader access to expertise from international operators to bring a perspective on international best practices to Canada, as we have done.
But, the existing telecommunications foreign control restrictions are, in our view, an overly broad and inefficient regulatory tool.
In today’s global environment, Canada needs a more nuanced and effective tool as soon as possible.
Established companies in the telecommunications sector can go to the Canadian and US debt markets and raise capital on a relatively cost effective basis or tap into low cost equity. In sharp contrast, it would be far more difficult for a start-up such as Globalive to do so. It is only once firms have established track records and predictable revenues that the premium associated with start-up businesses goes away.
This gives the incumbents an enormous advantage in acquiring both domestic and foreign capital.
And finally, we need regulations that support the consumer, not simply regulations which support entrenched anti-competitive behavior. We must deal harshly and swiftly with abuse of market power or dominance.
Specifically I am talking about the acquisition and control of spectrum, tower sharing, and roaming agreements.
Despite the fact that spectrum is a finite resource, incumbents squat on large unused spectrum holdings in order to limit competition.
With the debate about the upcoming 700Mhz auction in full swing, let me toss my opinion in the ring.
The government should create rules allowing the new entrants a chance to bid for access to spectrum in upcoming auctions and ensure incumbents do not acquire it at any price to stave off further competition.
And don’t be fooled by the claims that the incumbents should have unfettered access to new spectrum for rural build-outs. They will build out in rural areas only when there is a positive business case and this is no different than the situation for new entrants.
The incumbents are calling for a level playing field. Ironic. These are the same companies that control a whack of sub 1 ghz spectrum.
There’s a very simple principle we learn as children. If you can’t eat what’s on your plate, don’t ask for more!
This auction represents the battleground for future competition in Canada. The wrong policy decision could pave the way for the incumbents to hoover up supply and leave new entrants struggling with insufficient bandwidth.
Sustaining competition will rely very heavily on how the federal government addresses this issue.
Beyond the auction, tower-sharing should be encouraged with incentives, or at a minimum, disincentives for not sharing.
Roaming agreements between incumbents and new entrants should operate as they do in other countries with seamless hand-off between carriers, versus the dropped call hard hand-off in Canada. Wholesale domestic roaming rates should be capped at reasonable levels that really do take into account the marginal cost of the minute or megabite.
Stronger consumer protections are needed, including preventing market players from charging abusive early termination fees, excessive overage charges, system access fees and my personal favourite, the Government Recovery fee that has absolutely nothing to do with the government!
And while the CRTC has the power to step in and regulate the wireless carriers to facilitate a competitive market place that enhances consumer benefits; it has generally declined to do so. There is an opportunity for the CRTC to play a greater role in protecting Canadian wireless consumers, particularly given the nascent and rapidly evolving mobile content industry.
With the large telecos now owning and controlling most major media assets in the country, we must develop and implement a system to ensure fair and equal access to all Canadian content for all market players, including resellers, over-the-top providers and facilities-based distributors.
We need to follow other countries and promote, not attempt to hinder, over-the-top content delivery. Consumer preference for choice and convenience must be allowed to win-out over vested interests. Consumers want viewing options, not $100 -per month cable bills and huge usage based billing surcharges with low usage caps.
While we could have been accelerating our rate of innovation, and our domestic rollout, we spent an inordinate amount of time in an unprecedented regulatory and court battle over the past year and a half.
The battle was veiled in the premise that WIND Mobile wasn’t Canadian enough.
But lets be frank. It’s been a well-coordinated, well orchestrated lobbying effort by the incumbents that resulted in an entirely new telecom review process. An unbelievable finding that was ultimately overturned, re-ignited and then appealed – involving numerous hearings, multiple regulatory and government bodies and countless tax payer dollars.
And that’s exactly where the incumbents would like us to be – held up in regulatory limbo instead of accelerating our roll-out nationally to finally bring an alternative to communities across Canada.
Consider this…
In 18 months, the incumbents have shared only a handful of towers with WIND, despite being legally bound to do so and despite the obvious environmental and economic benefits.
Not to mention the fact that Canadians are reluctant to welcome new towers into their communities, they are insisting that operators partner and it’s time we listened to the consumer in the face of this industry issue.
On the marketing front, Rogers even went to the trouble of creating a flanker brand called Chat’r whose only market positioning was to create false hype about how it allegedly had a lower dropped call rate than new entrants.
Their misleadling advertising went so far that it resulted in an indictment by the competition bureau.
So, instead of us moving together as a sector to innovate and bring prices down and service levels up, we have faced unnecessary barriers that prevent competition from thriving the way it should.
Despite that, we will not be sidetracked from our goal of improving wireless for Canadians.
And we are starting to penetrate. In fact, in Q1, WIND emerged as the fastest growing carrier in the country. We have reached the 300,000 customer plateau, we are distributing in over 500 locations nationally and roaming to over 200 countries internationally. And Canadians are responding and feeling the early benefits of competition.
72 per cent of Canadians say they have more freedom now that they can avoid contracts. And over half of Canadians feel that there is more value in their mobile offering.
Not surprising, the survey results show that Canadians overwhelmingly feel that the increase in wireless competition has been positive.
But Ladies and gentlemen, competition doesn’t just ‘happen.’ It isn’t a guaranteed result of acquiring spectrum in an auction.
True competition and the long term benefits of competition for Canadians will occur when, and if, our regulatory framework is improved, our access to foreign capital is unhindered and the playing field is leveled to the benefit of Canadians.
We cannot simply rest on our buoyed optimism from the 2008 auction. Canada is falling behind in wireless and we don’t have the luxury of time to delay introducing changes to the Telecom Act that are necessary to ensure that competition thrives in the sector.
So that’s the real story. It’s time for change and for every player in this sector to become refocused on how to move our entire industry forward, instead of holding each other back.
Only then will Canadians feel the true benefit of wireless competition.
Thank you.
