Archive

Posts Tagged ‘Broadband’

Angels to Telus: Don’t be Evil

A reader, Sean, sent me an email yesterday, two actually and a couple of questions. They reminded me of something, and then inspired me to read and write. Thanks Sean.

The immediate point was that Shaw Media and Telus are about to ramp up bandwidth caps and UBB — the cornerstones of the the pay-per Internet model — in western Canada. To be sure, people in Alberta and BC have already had lots of this model already.

However, while both Shaw and Telus have had ‘bandwidth caps’ and UBB on the books, they have not used them. That looks set to change.

Shaw appears to be first off the mark in wanting to kick these into action, as it told, again, those pesky investment bankers who are now hovering around companies because it is the ‘end of quarter’ reporting season of its plans. As Shaw stated, it has the market power to impose the pay-per pricing model and supposedly the consent of its users. I don’t doubt the former, but the latter claim is circumspect.

Shaw has come full circle in the past sixth months after acquiring Global TV and has begun to sing a new gospel from the top of its lungs in favour of regulating OVP (online video providers) such as Apple TV, Google, Netflix, etc..

Telus, too, has had pretty tough bandwidth caps and UBB on its books.  It’s cost per ‘extra’ GB when going over the cap is a punitive $2-5. Telus infamously shut down access over its ISP to the website “Voices of Change”, a site run by the Telecommunication Workers Union, during a strike in 2005.

It has been no angel. However, I am also reminded that amongst the ‘big six’ — Bell, Shaw, Rogers, Quebecor, Telus and Cogeco — Telus is something of an exception, or at least has a few characteristics that distinguish it from the others and put it on, as my friend Marc-Andre put it, “the side of the angels”. We should probably give credit where credit is due.

First, we must remember that in a situation where Canada stands unique, if not completely alone, in the universal coverage of ‘bandwidth caps’ and pay-per GB ‘excess usage charges’, Telus has not yet made the move to implement these measures and might yet be dissuaded. So, for what that’s worth: Telus, please don’t be evil.

Second, on some key ‘structural issues’ that go to the heart of the organization of the network media in Canada, Telus stands alone amongst the ‘big six’ for not following the path of ’empire’ by becoming vertically-integrated with a dominant broadcaster.  This means that its voice has been absent among all of the others who have called in unison for the CRTC to regulate online video providers.

Third, Telus recently told the Standing Committee on Canadian Heritage  in no uncertain terms that it opposed the Shaw-Global TV and Bell-CTV amalgmations, respectively. In sum, Telus has not embraced the shangri-la of ‘media convergence’.

That, however, does not mean that it is not in the TV business. It serves as distributor of Bell satellite TV in the west. It has its own IPTV service, mobile tv channels, and so forth. It  needs programs and ‘content’ for its IPTV service, mobile tv channels, and so forth as well, and therein lies a problem.

Telus already claims to be having a lot of difficulty getting the programming that it wants on reasonable terms. This is more grounds for its opposition to vertical integration still. For that reason, Telus will stake out a unique stance at the upcoming CRTC hearings on vertical integration in being the only major incumbent likely to argue on behalf of some form of structural separation. This is a good thing and, again, Telus is on the side of the angel

Having just been blessed by the CRTC (and Competition Bureau) over the past six months, it is hardly likely that the CRTC will do much more than tinker around the edges with vertical integration. The fact that Industry Minister Tony Clement has already voiced his view that vertical integration is the way of the future and structural separation irresponsible only reinforces the impression.

All of this reminds me that the commitments to open networks is not about paying homage to abstract principles but to a concrete trilogy of real considerations: open networks, open sources and open societies. At the present conjuncture, each is under severe pressure, but yet to be bowed.

While no angel, Telus is on the side of the good with respect to open networks and should be applauded to the extent that it is. In terms of open source, the approach helps generate ideas, examination and conversation like Sean’s email did yesterday. Several others have written lately too, so thanks, but I would also like to suggest that it is best to raise issues here. That way others can weigh in, and go off on their own, too.

These are also the things upon which an open society — the ultimate endpoint of the trilogy to begin with — depends.  There are important questions about just how far Canada has fallen from that standard.

We have corporate disclosure rules that pale alongside those in the United States. Not just the major network media conglomerates, but publicly-traded corporations in Canada generally disgorge far less information to the CRTC and Competition Bureau than their counterparts in the US are required to do by the FCC and Department of Justice.

The Harper Government has clamped down on information flows and the general tenor it has set has simultaneously fortified and calcified the historical proclivity towards information secrecy in Canada relative to other capitalist democracies. Without a full-commitment to open societies and open sources and open networks, none of these elements can flourish on their own. It is a thought worth bearing in mind, I think.

The Great Struggle for the Soul of the Internet and Network Media in Canada (Part 1)

A strange confluence of forces has just made the push to have Netflix and other over-the-top video distributors (OVDs) such as Amazon, Apple and Google regulated by the rules of the Broadcasting Act a whole lot stronger.

Events kicked into high gear this week when Astral Media renewed calls for the CRTC to regulate OVDs just like any other broadcaster. Bell, Rogers and Shaw quickly endorsed the call.

Astral, Bell and other incumbents are coming under increased scrutiny from investment bankers worried that OVDs could wreck their bottom line and this seems to have increased their resolve to thwart would be rivals. Moody’s — the investment ratings agency – also recently raised such concerns, while casting doubt on the dominant integrated media companies’ — Bell CTV, Shaw Global (Corus), Rogers City TV and Quebecor Media – decisions to acquire ever bigger stakes in the television business.

When investment bankers worry, CEOs tremble and Netflix as well as the open Internet generally could end up paying the price.

The Canadian Media Production Association‘s recent appeal to the CRTC to regulate Netflix under the Broadcasting Act added to the full court push, as did the Supreme Court‘s decision last month to hear a case from various groups representing media workers who want ISPs as well as Netflix, Apple, Google, and so on to be regulated like broadcasters.

Lastly, a Standing Committee on Canadian Heritage report published last month and the CRTC’s upcoming reviews of its unpopular wholesale UBB decision and vertical integration have also brought the issues to a head.

These issues are not new. In fact, in its famous “new media” decision in 1999, the CRTC categorically asserted its authority to regulate broadcasting services delivered over the Internet, but decided to stand on the sidelines while such services were in their infancy.

The vertically-integrated, dominant telecom, cable and internet service providers love the approach because it has given them a green light to develop new markets while letting them off the hook with respect to issues about vertical integration, anti-competitive behavior, Cancon requirements and funding commitments in the emerging digital media universe.

The CRTC’s decision to stand on the sidelines has no doubt played well to the ‘hands-off-the-Internet’ crowd, as well. The truth is, however, that this has only postponed the day of reckoning.

That day of reckoning has been moving ever closer since broadcasters finally made a concerted effort to launch substantial video portals in 2007/2008 (e.g., CBC.ca, CTV.ca, GlobalTV.com), while offering some programs through Apple iTunes and YouTube. Simultaneously, they have  fought tooth and nail to defend their existing markets and expand into new ones, while using a well-stocked arsenal of measures to block rival OVDs such as Netflix. Six such tactics stand out:

First, bandwidth throttling was used by Bell in 2008 to cripple the CBC’s attempt to use BitTorrent to distribute an episode of Canada’s Next Great Prime Minister, while today Rogers’ throttling of P2P applications causes no end of frustration for those who play World of Warcraft online.

Second, ‘bandwidth caps’ and Usage-Based Billing are being used by all of the major ISPs to deter online video use. Netflix has deliberately degraded the quality of its service to help subscribers avoid these punitive and restrictive measures as a result.

Third, the incumbents do not apply the same measures to their own services. Bell’s chief regulatory officer, Mirko Bibic, recently provided a great example of the tortured logic used to justify such treatment when he argued that, despite using the same network facilities, Bell’s OVD service is not a ‘true’ Internet-based service, while Netflix is.

Fourth, the incumbent telecom and cable companies’ refusal to interconnect their systems with others has blocked large OVDs and Internet companies such as Amazon, Apple, eBay, Facebook, Google, and Netflix from bringing their ‘content distribution networks’ as close to users as possible.

Fifth, Canada’s integrated multimedia conglomerates have used a combination of program rights, geo-gating and digital rights management (DRM) technologies and a smattering of deals with Apple and Youtube to shore up their control over access to our ‘national media market’. The Rogers, Bells, Shaws, Quebecors, and so on of this country do not like the prospect of having to compete for each and every new digital market with newcomers one bit; nor do cable providers in the United States.

As a recent New York Time’s article observes, Time Warner and Cablevision are locked in battle with Viacom (MTV, VH1, etc.) and Scripps Howard (HGTV, Food Network, etc.), with the cable companies arguing that the rights they have acquired to deliver channels to audiences’ tv sets also lets them beam those same channels over the Internet to iPads and iPhones. Viacom and Scripps Howard vehemently disagree.

In the incumbents’ “perfect world”, they would simply fold the OVD market into the suite of rights they acquire for traditional television markets without having to compete with Netflix at all. If they had it their way, the Internet would just be bolted on to the side of their lucrative television business.

Netflix strengthens the hands of content creators and rights holders on both sides of the border relative to traditional broadcasters. In Canada, this battle over the essential resources of the media economy — networks, money and copyrights — are concealed by a fog of sanctimonious rhetoric about cultural policy led by vested interests.

Seen from the broadcaster’s point of view, Netflix’s recent acquisition of new drama series and its deal with Paramount Studios for online video distribution are just further evidence that the company is steadily encroaching on their turf — one more reason why it should be quickly brought to heel. Even if we thought for a moment that regulating Neflix and OVDs was a good idea, what should we do as Hollywood experiments with using Facebook as a new ‘window’ for blockbusters such as The Dark Knight, Philosopher’s Stone, Yogi Bear, and Chamber of Secrets, among others?

Do we regulate Facebook as a broadcaster too?  I’m all for attending to that company’s privacy issues and other mattters, but Facebook and broadcasting? Obviously, there is no shortage of slippery slopes and pitfalls along the incumbents’ garden path.

The sixth defensive weapon in the incumbent’s bid to hobble new rivals is their coordinated push for government regulation. Perhaps the award for sharpest U-turn on these issues goes to Shaw after it acquired Global TV in the fall of 2010.

After a decade of opposition to the CRTC in general and to the regulation of the Internet specifically, Shaw President Peter Bissonnette laid out the new gospel in front of the Canadian Heritage Committee referred to earlier: “If there’s one message we want to leave with you . . . it is that over-the-top competitors have a free ride. They’re aggregators of broadcasting. They provide broadcasting services in Canada.” They should be regulated like broadcasters.

For anybody still under the illusion that the Internet is unregulable, Shaw and others point to extensive regulatory tools that they’d like to see pressed into service: e.g. ISP levies; extending Section 19 Income Tax Act Exemptions so that adverting on Canadian Internet sites can be written off just as it is for Canadian-owned newspapers, magazines and broadcasters; Canadian Media Fund contributions; Cancon Quotas, etc.

Acceding to the full sweep of this agenda would not just wreck Netflix’s ‘business model’, it would destroy the future of the Internet. To stem the tide, we need to understand just how wildly out of synch the ‘sky-is-falling’ rhetoric is with the fact that the television industry is more lucrative then ever. We also might wonder if Netflix, Apple, Google, Amazon, et. al. might agree to adding some water to their wine in return for a quick stop being put to the discriminatory practices that now hobble their activities in Canada?

No ABC in 1st 2011 Canadian Election Debates

No Australian Broadband for Canada, or much to do with the Internet, media, telecoms and copyright issues at all in tonight’s federal election debate.

Before I go any further, though, let me confess that I did not watch all of the federal election debate tonight. I’m sorry, I had other things to do. But I did catch about a half-hour of the debates on tv, another 10 minutes on radio while in the car, and another 15 minutes of video with no sound while at the gym. I may have missed something. Zygmunt Bauman calls it the ‘liquid life’ — that is, cobbling things together to make up your life on the fly.

But, I think I caught the gist of things and that is that none of the leaders really had much to say on media and Internet issues. Nothing about copyright or the uproar over Usage-Based Billing. In other words, none of the ABCs of ‘digital media policy’ merited much attention.

To be sure, I didn’t expect broadband Internet, media, copyright and UBB to be at the top of the agenda in tonight’s federal election debates. In fact, such issues probably should not be at the top of the agenda and generally I agree that funding pensions, healthcare, the general state of the economy, widening economic inequality, and the moral integrity of the Government-of-the-day are probably more important. Still, though, I didn’t expect digital media and Internet issues to be left out altogether, either.

There are a great many who wield fancy labels like the digital media economy, creative industries and the lot to give such issues a lustre and limelight they may not deserve. Big economic numbers for the media, telecom and Internet industries, and their contributions to the economy, culture and society, are often wielded about to underscore the impressiveness of these things. There is, truth be told, a great deal of puffery involved when it comes to talking about these things.

All of which is to say, that while I agree that digital media and Internet issues probably should not be artificially hyped, they should not be peripheral too the election, or just a blip that gets twittered about opportunistically amongst the twitterati. Why should we care if these issues are not at the centre of televised electoral debates?

First, because as a study by Canadian Media Research Consortium just released underscores, television is still people’s preferred medium for information and news. Television still plays an extraordinary powerful role in bringing things to people’s attention. This not just true for old people or couch dwellers, either. The fact of the matter is that those who spend the most time online are also the heaviest traditional media users, too.

Second, most of the primary news sources behind online news sites are creatures of the dominant traditonal news providers: CTV, Global, CBC-Radio-Canada, Globe & Mail, Toronto Star, Le Presse, Quebecor Media Inc. These entities largely, although not exclusively, play a big role in setting the news agenda for the country’s media as a whole, including the ‘news aggregators’ and blogosphere that thrive off of their efforts.

Of course, we can gain access to the New York Times, Le Monde and the Guardian or the Huffington Post, but they aren’t going to be much help on matters specifically Canadian in focus. Elections are one just such crucial matter.

For issues to be taken as a going concern in a democracy, they must be on the media screen, and in today’s world that means being on at least three different screens: the ‘big screen’ of tv, the glowing screen of the computer, and the wee screen of portable ‘devices’.

Third, media and Internet issues have been central themes in other national elections and politics. Network neutrality and broadband development were cornerstones of the Obama campaign in 2008, for instance; his administration has also paid considerable attention to issues surrounding the so-called ‘crisis of journalism’ and media concentration since then.

In Australia, the Government’s creation of a National Broadband Network to do an end-run around a recalcitrant incumbent — Telstra — in order to bring about a ultra high speed, broadband Internet service to ninety-plus percent of all Australians was extremely prominent and divisive in the 2010 federal elections. The Labour Government now in power supported the initiative, as did the Greens, a few independents, Microsoft and Google.

In Canada, the Usage Based Billing issue has received pretty good coverage in general, but broader media and Internet-related issues and, specifically, their place within the context of the elections, have not fared so well. The link between the media and Internet, on the one side, and electoral politics, on the other, has mostly been made on the Internet and Twitter.

This is important because, as the Canadian Media Research Consortium study pointed to above states, if stranded on a desert island, the internet is the least likely of all media to be let go by people. The importance of the internet in general is reflected in the uses of Facebook and Twitter in particular.

Facebook has been central to the efforts of the advocacy group OpenMedia.ca to make these issues an important part of the election campaign and all the political parties have responded rather eagerly, even if sometimes opportunistically, to ‘trending Twitter topics’ and Facebook-based campaigns.

At the end of 2010,Twitter had an impressive average number of monthly users in Canada of around 3.5 million, according to Comscore (p. 19).  That’s a lot. Many fear Twitter-induced attention deficits and depraved forms of journalism will be the natural upshot of Twitter’s 140 character per tweet format, but Alan Rusbridger, the editor of the Guardian in the UK, offers a rousing defense of its contributions to journalism and to public discourse.

However, we also must remember to keep things in perspective. The number of people who use Twitter — roughly 3.5 million a month — is less than the number of people who watched the debates last night or that buy a newspaper every day.  In terms of credibility and trust, the press blows away online sources, and television still fares somewhat better as well — although not much (see p. 14 of the Canadian Media Research Consortium study).

The Twitterverse is also a lot smaller than Facebook. With 22 million unique users a month, Facebook has nearly 7 times the number of unique monthly viewers in Canada (22 million) than Twitter has.

Interestingly, the Broadcast Consortium overseeing the organization of the federal election debates had the foresight to add a Facebook page to the mix of how political debate is circulated in the emergent network media ecology. The development suggests an interesting attempt to meet people where they are.

Facebook also raises anew questions about the relationship between popular culture, the media and politics. Its increasing pivotal role has drawn it closer to traditional conceptions of news and politics. Its inclusion as a formal part of the ‘operational machinery’ of the first televised English-language debates are one indicator of that. Recent overtures by Facebook to news executives is another.

Indeed, as a story on the Globe and Mail’s technology website the other day relayed, Facebook “is looking to strengthen its relationship with the news media and has already helped boost traffic to news websites” (see here).  It also created a special Facebook page just for journalists who want to integrate social media into the journalism process.

The New Yorker drew the connection a step further this month by requiring online readers of the magazine to use Facebook’s “Like” icon to gain access to one of its articles. The experiment essentially sets up the “Like” button as a kind of  “paywall”, but one that tries to translate the ‘social capital’ of Facebook users into a real pot of gold that many commercial media providers hope exists at the end of the digital rainbow.

All of this, of course, adds yet another wrinkle in the ‘evolution of the news’, to put it somewhat grandiosely. To date, the debate has been much about the impact of ‘content aggregators’ like Google and Yahoo on the news industry, and wails from many stalwarts in the latter that the blogosphere lives parasitically off the hard labour of real news organizations and journalists. Enter Facebook stage left.

There is something in all this related to the ‘functional convergence’ between ‘search’ and ‘social’ that I spoke about last week in relation to what I called the Google Switch — i.e. Google’s response to increasing competition from Facebook by increasingly adding ‘social capabilities’ such as ‘+1’ to its ballooning suite of functions such as Orkut, YouTube, Blogger.  However, in the circumstances just outlined, the drift is not from search to social, but rather the other way around. If such a ‘functional convergence’ is in fact taking place, then perhaps it is not just Google, but Facebook and other social networking sites, that will emerge as pivotal to the ‘future of the news’.

Communication researchers have always understood how media and information flows are nestled within existing networks of personal relationships.  Now the process is being digitized, fully commercialized, and rendered visible. Through all of this, will Google and Facebook be good for the News, good for democracy?  Hmm, now there’s a question ripe for pondering in the context of the 2011 election.

Conservative Election Platform and the “Nothing New” Digital Economy Policy

The Conservatives released their election platform this morning. The news with respect to those looking for something with respect to broadband Internet development and digital media policy?  Nothing new.

For those looking to see some shift in policy direction that might increase broadband Internet development, greater competition and anything else that has led to the uproar over Usage Based Billing, bandwidth caps and the pay-per Internet model, the document offers little.  No measures are offered to foster greater competition, such as setting aside spectrum for new wireless entrants, encouraging greater foreign ownership, or regulatory reforms so that the CRTC can better address problems of media, telecoms and Internet concentration. Instead, it is business as usual: the maximum reliance on market forces possible.

Nothing new is on the table with respect to broadband Internet development, although existing commitments of spending $225 million over the next five years to help fund the extension of such capabilities to 200,000 rural and remote households are maintained (see page 65).

The Quebec Government’s budget, in contrast, adopted last month announced spending of $900 million between now and 2020 to extend broadband Internet to all Quebecers and, in particular, the 290,000 households in Quebec alone theat currently do not have access to broadband Internet capabilities. In other words, the Conservative platform not only lowballs broadband development relative to, say, Australia, Britain, France, Finland, Korea, Japan and the U.S., it pales in comparison to actions taken by one province: Quebec.

No commitments are made to anything that looks like Network Neutrality, either.

In terms of copyright and digital media policy, nothing new here either, except a promise that a majority Conservative Government will reintroduce and pass quickly the Copyright Modernization Act that died when the election was called. That Act, as others have pointed out, has some very important beneficial qualities, such as formalizing fair use provisions and allowing individuals to create copies of digital content for their personal use across various platforms, i.e. computers, digital music players, tv, and computers.

The Copyright Modernization Act, however, has two fatal flaws: (1) provisions requiring ISPs to function as copyright cops and (2) the outlawing of attempts to undo digital locks that tie media content to specific devices.

Requiring ISPs to function as digital cops is a problem because it puts them on the slippery slope of playing the role of gatekeeper in the digital media environment. Preventing people’s attempts to undo digital locks is also problematic because it prevents people from using the freedom to make personal copies of digital content for their own purposes across different devices/platforms. In other words, digital locks and the content industries’ ability to lock content to specific devices trumps users’ rights to enjoy media content they have legally acquired across whatever platforms they choose to use.

With respect to a few other matters central to cultural policy, the election platform holds the line. For one, the CBC is not mentioned at all, thus sparing it from what some see as a Government hostile to the public broadcaster. This could be a good thing in the face of persistent worries that the Conservatives have a hidden ‘scorched earth’ approach to the CBC and all things cultural policy.

The Canadian Media Fund and Canadian Periodical Fund are also mentioned, without either new commitments made or drastic cutbacks. Thus, rather than slashing the CBC and gutting programs and funding mechanisms designed to foster the development of media content, the Conservatives appear set to maintain the status quo.

All-in-all, the Conservative election platform lays out an underwhelming approach in light of the magnitude of issues in front of us. Despite grandstanding by both PM Harper and Industry Minister Clement in the face of the massive uproar over the January 25 UBB decision by the CRTC, nothing at all is offered that suggests relief or that such considerations are central to the Conservative’s digital media policy. That, in turn, seems to be more rhetoric than substance, a mantra invoked in the hope that some of the pixie dust associated with digital media can transform Conservatives into hipsters. That is definitely not the case.

Two Open Broadband Internet Proposals vs the Pay-per Internet Model

Two new research papers released in the past week add insight into the Usage-Based Billing (UBB) debate in Canada, or what I have been calling the evolution of the pay-per Internet model. The papers are by Michael Geist, the University of Ottawa law professor, and by Bill St. Arnaud, the Chief Research Officer for CANARIE for 15 years (until 2010) and a telecoms engineer. Geist’s paper can be found here, while St. Arnaud’s paper is here.

Both papers were commissioned by Netflix, in light of the fact that developments in Canada are sucking it and others such as Google, Apple, and so forth deeper and deeper into digital media policy issues. All are becoming fixtures in CRTC proceedings. Both papers bear one significant subtle influence of this sponsorship (as I will discuss briefly below), but other than that provide extremely valuable help wading through the technological, economic and regulatory issues surrounding the UBB debates.

Geist and St. Arnaud are both convinced that the CRTC’s plan to revisit it’s January 25th UBB decision that ignited the firestorm over the pay-per Internet model in Canada is far from sufficient. As Geist indicates, a whole series of decisions over the past few years will have to be revisited and the regulator and policy-makers are going to have to deal head-on with the fact that underlying these problems is a heavily concentrated market for Internet access in Canada. I feel similarly, and have laid out the ‘long march’ to the pay-per Internet model in an earlier post.

Playing on earlier decisions regarding the incumbent telecom and cable companies use of technical measures to ‘throttle’ different types of Internet uses that they argue put excessive strain on their networks — the so-called Internet Traffic Management Practices — Geist’s first proposal is for a series of what he brands IBUMPs (Internet Billing Usage Management Practices). The basic gist of which is to make the incumbents’ billing practices for Internet services easy to understand and reasonable when it comes to so-called excess usage charges.

His second set of proposals aim to promote greater competition in the Internet access market. This includes allowing more foreign competitors to enter Canada.

It also involves allowing smaller ISPS and Content Distribution Networks (see below) more scope to interconnect with the incumbents’ networks much deeper in the network and closer to subscribers’ homes (especially the cable companies, who have dragged their heels on this matter for more than a decade). Finally, it means cultivating a greater role for alternative Internet access providers, from city-owned networks, to cooperatively run ISPS, as well as expanding the role of provincial and federal broadband development programs.

As an interesting aside, the Liberal Party’s platform announced on April 2nd as part of the current federal election campaign effectively doubled the commitment that the Liberals would put into expanding broadband networks in remote and rural areas compared to the modest $225 million announced by the Conservatives in 2009. The Quebec Government went even further in the 2011-12 budget passed in March, where it announced that it will invest around $900 million in bringing very high speed Internet access to all Quebecois (see here at pages E.93-96; also see St. Arnaud).

It did not specify the exact capacities of the network, but its references to similar plans in Australia, France, Finland and the US suggest that the bar is high, probably around 100 MBps. Neither the Liberal Party’s election platform nor even the much more ambitious Quebec Government’s scheme are equivalent to or the same as Australia’s National Broadband Company initiative, and nor should they be.

However, they do underscore (1) the under-development of broadband Internet in Canada, (2) the lack of competition offered by the current market, and (c) a willingness to rely on a variety of providers, from the traditional incumbents, to municipalities and provincial governments to improve on the situation at hand. They also suggest that Geist’s proposals, far from pie-in-the-sky, are grounded and with some real, even if tentative support in some crucial quarters.

Bill St. Arnaud’s paper also offers much food for thought and complements Geist’s paper very well. He makes three key points.

First, the massive growth of video online is not necessarily causing congestion. Huh?  How could this be, with clear evidence that the growth of video traffic has been stupendous, ranging from 50 to 100 percent per year and with continued high rates of growth expected in the next few years ahead?

This is because sources responsible for this massive increase are increasingly turning to Content Distribution Networks that, basically, bypass the public Internet and deliver their content as close to their subscribers as possible. These so-called Content Distribution Networks are not only being deployed by outfits such as Netflix, but other large Internet content and service providers, from Amazon, to Google and Facebook. The basic point is that they take traffic off the network for much of the distance a message has to travel.

Second, to the extent that congestion is a problem, this is an outcome of decisions made by the incumbent telecom and cable companies about how to apportion the capacity of their network. As Geist quips in his paper, the ‘chicken roasting channel’ recently introduced by Rogers, for instance, is just so much bandwidth allocated to that ‘service’ rather than to the Internet.

Third, and this is where I think St. Arnaud has an amazingly powerful and clear point, the incumbent telecom and cable companies — the ‘big six’, as I have called them: Bell, Rogers, Shaw, Telus, Videotron and Cogeco — appear to have no problem with congestion when it comes to launching their own video content services delivered over the internet, e.g. CTV.ca, globaltv.ca, TVA.ca, etc. Congestion is only caused by other providers’ video services.

Lurking in the background of all this is that we’ve seen this all before. A few years ago, P2P/file-sharing and music downloading sites were the culprit; now the target is online video services. The cable companies have been especially remiss in dragging their feet for a dozen years or more on allowing independent ISPs to access their distribution infrastructure. Despite being required to do so before the turn-of-the-century, the cable cos have thrown one obstacle after another in the path of ISPs requiring last mile access through cable facilities to gain access to subscribers.

All said and done, Geist and St. Arnaud’s paper respectively do a great service. They are timely interventions that help us understand the issues at hand and, if successful, they may help to frame the debates that take place at the hearings that the CRTC has scheduled to revisit the UBB decision in June.

However, we should not hold our breadth on that, and in that regard these papers do a real good job at holding the regulator’s feet to the fire (see my earlier post on this point). The CRTC has a very broad remit to regulate in these matters, as the Telecommunications Act (1993) (sec. 27 (5)) makes clear, but has chosen to draw the proverbial camel through the eye of the needle. With the magnitude of the issues at stake, this is unacceptable.

However, I also think that both papers need to go even further in at least four ways. First, both papers make claims about the highly concentrated state of the telecom, cable and Internet access markets in Canada, but offer little to no data to illustrate and support these claims. Good quality data is now available on these points and they should use it.

Second, both papers focus on the UBB issue, or what in regulatory parlance is now called an economic measure for managing congestion on the Internet. However, the CRTC’s Internet Traffic Management Practices decision (2008) sets out a hierarchy of preferences for dealing with such problems when they can be shown to exist: (1) network investment, (2) economic measures such as UBB, and (3) technological measures, aka throttling.

Neither paper says much, if anything, about the top priority: network investment. Why? At between 15-18 percent of revenues, current levels of investment in their networks by the big six is low by historical and global comparative standards (although in line with similarly low levels in the U.S.). And this despite the fact that the Internet represents a massive new source of revenue ($6.5 billion in 2010).

Third, neither paper pushes as hard as they might on how the use of UBB and the allocation of network capabilities by the incumbents to their own services may constitute a form of “unjust discrimination”. The issue is not totally ignored by any means, but I think it could be pushed further and that doing so is important not just to the question of whether or not we’re going to be stuck with a highly concentrated Internet market and the pay-per Internet model in Canada, but concentration across the whole sweep of the network media ecology, from traditional media to the Internet.  Let me explain. I’ll conclude by returning to my fourth point.

Insofar that these papers deal with ‘unjust discrimination’ they seem to have in mind section 27 of the Telecommunications Act that specifically outlaws such practices. It is a good victory to be had, if it can be had. And the CRTC has, as I stated above, much discretion in how it goes about making such determinations. To the extent that it has chosen to blinker itself is a problem of the first order.

However, it may be possible to go even further and look to the next clause of the Telecommunications Act, section 28, that specifically makes the issue of discriminating between video services, or broadcasting as such things were known when the act was written nearly 20 years ago, a matter of potential concern. Indeed, the CRTC has enormous authority under this section to deal with the issue of discrimination while meeting other objectives of the Broadcasting Act.

Herein, however, may lay the rub, given that both of the papers being discussed here were funded by Netflix, and the last thing that it and other services like it (read: Google, Apple, etc.) want is to be defined as broadcasting services, which could happen if we were to assign the ‘online video distributor’ label on them like the FCC and Dept of Justice did recently in the US in relation to the Comcast/NBC merger.

I, too, am very leery about slapping the label of broadcaster on such entities because of all that would mean with respect to CanCon rules and the like. The CRTC has always indicated that it believes that it has the authority to regulate online video distributors under the Broadcasting Act (see its seminal 1999 new media decision here), but up to now has not seen Internet television services as being significant enough and too experimental to actually do so.

The question of whether ISPs could also be brought under the purview of broadcasting regulations so that, just like cable and Direct-to-Home satellite providers, they too could be required to contribute to funding and displaying CanCon has also been hotly contested. That route seemed to be foreclosed by a Federal Court of Appeal decision in 2010, but that too has now been appealed to the Supreme Court of Canada.

Now, the incumbents en masse are pushing hard to have OVDs like Netflix, Apple and Google regulated as broadcasters just like their own broadcasting-related services. The irony here is that for Netflix to push its case on UBB as hard as possible, adding some water to its wine by accepting some such designation could go a very long way to putting a stop to the discriminatory practices that are now hobbling its access to Canadian subscribers.

While this is far beyond the scope of what I can say here, perhaps a new designation along the OVD line devised in the US might be imported into Canada for just such purposes. That would mean distinct treatment from broadcast television in general, but also some obligations to open up their services to Canadian media creators.

It might also allow a much more forceful push against the anti-discrimination rules of not just one section of the Telecommunications Act, but both sections 27 and 28. Done right, this need not ‘trap’ new players like Netflix in the maw of outmoded aspects of the Broadcasting Act. Instead, it could potentially help to usher in an entirely new media model where all of the bits and pieces that make up the traditional media model are disassembled and reassembled anew in light of the realities of the digital network media industries in the 21st century.

And finally to return to my fourth critique of the Geist and St. Arnaud papers. Both papers target the upcoming UBB decision. This is great, but I think it might be helpful to try and kill two birds with one stone by putting another potentially even more important upcoming regulatory review in their sights: namely, the CRTC’s hearings scheduled for June 2011 on vertical integration.

The ‘vertical integration’ hearings were scheduled late last year but given added impetus when the CRTC approved Bell’s acquisition of CTV last month. The idea of holding such hearings reflects the fact that Canada now also has the dubious honour of standing alone in the extent to which fully-integrated media conglomerates have become the norm. In the U.S., the fully integrated media conglomerate has become the exception (e.g. Comcast/NBC-Universal) after the disastrous AOL Time Warner merger and is pretty much in retreat in almost every other developed capitalist democracy.

There is indeed every reason to be very skeptical about these hearings given that they are a classic case of “bolting the barn door after the horse has already left the stable”. However, given that the use of UBB is completely tangled up with the crucial question of whether or not the “big six” media conglomerates in Canada — Bell, Shaw, Videotron, Rogers, Shaw, Telus (the latter to a lesser extent) — are using the pay-per Internet model to disadvantage competitors and to protect their own traditional television services, as well as their recently-minted internet video services, we must keep our eyes on the full range of big issues before us.

Bandwidth Caps, Bankers and the Canadian Pay-Per Internet Model

Not being the quickest guy with numbers, I often wonder just how much of what we can do on the Internet before hitting the Rogers ‘Bandwith Cap” wall that comes with my service? Using Rogers high-speed express service, I get 60GB per month, after which I will have to fork out $2 per GB.

I mean, first of all, just having to even think about this, let alone having to calculate it is a pain in the neck.  The Globe and Mail had a good break-down the other day of how much bandwidth is involved in downloading email, music files, tv programs and movies. Here’s its graphic.

So, I could send 4 million emails or download 8,570 songs, 37.5 television shows (hd) and 19 movies (hd).  Even if I’m a mad, crazy emailer or music downloader, I’d unlikely hit the limit. But, then again, what if I had a mass distribution list for the eco-feminist news letter I send out to 2,000 people every month, or to my red meat eaters club?

What if I play World of Warcraft? If you think I’m being funny, well, I am trying. But take a look at Teresa Murphy’s letter to the CRTC outlining how Rogers throttles World of Warcraft players. The problem is that restrictions and limits on how we use the Internet are popping up all over the place and for everyone, not just the villified ‘bandwidth hogs’.

The limits are also impinging on how Netflix operates in Canada as well. On March 28 2011, Netflix set the default quality of its video streaming service in Canada to low to help people conserve bandwidth.

In other words, Netflix has deliberately degraded it services relative to what it offers in the U.S. in response to the restrictive conditions imposed by the ‘big six ISPs’ in this country: Bell, Telus, Shaw, Rogers, Quebecor and Cogeco.  Users do, however, have a choice and can still select from three settings:

  1. “Good” – The default setting with good picture quality and lowest data use per hour (about 0.3 GBytes/hour)
  2. “Better” – Better picture quality and medium data use per hour (about 0.7 GBytes/hour)
  3. “Best” – Best picture quality and highest date use per hour (generally about 1.0 GBytes/hour – or up to 2.3 GBytes/hour when streaming HD content)

Tying up the Internet and its users in a thicket of technical and economic restrictions, however, could come back to bite the big 6 in the ass. For that too happen, however, we probably shouldn’t look to the CRTC or to the Harper Government.

The CRTC has already brazenly said that the review sparked by the furor over its January 25, 2011 UBB decision will be narrowly focused on that decision alone. In doing so, it ruled out a critical public examination of the ‘long march’ to the pay-per, provider controlled Internet model in Canada.

Industry Minister Tony Clement is a little more ambivalent on the matter. He offered no rebuke to the CRTC for stubbornly sticking to its myopic focus. He did, however, rebuke Bell’s attempt to replace its wholesale UBB with a new Aggregate Volume Pricing Model.

There are two more interesting areas that hold better prospects of turning this wreck of a digital media policy around, and both lead straight not to the consumer Internet market but rather to the capital investment market.

In a study by the New York branch of the investment bank, Credit Suisse, the author stated that the added cost of using over-the-top video services such as Netflix, AppleTV, etc. due to ‘excess usage charges’ (but which the “big six” exempt their own video/tv services from) could result in people cutting back on their cable and satellite bills. They could do that either by subscribing to a cheaper tier of channels, or dumping cable and satellite TV altogether.

The latter is improbable, at least in any great number, anytime soon.  The idea of cutting back to a cheaper tier of cable channels while cobbling together a range of over-the-top services such as Netflix, Boxee, etc., however, may have more legs. That scares the investment bankers because cheaper tiers mean lower ARPUs (average revenue per user), in the lingo, and that is one of the holy grails for figuring out how much companies are worth on the stock market, i.e. their market capitalization.

The UBB uproar has also spawned fears in the capital investment markets in Canada that Bell, for one, is taking seriously. Thus, during a Conference Call on February 10 2011 with Canada’s leading investment bankers, Jeff Fan of Scotia Capital posed the following question to George Cope, BCE’s CEO:

Yes, good morning.  Thanks very much.  I want to ask you guys about the broadband situation that’s going on.  A lot of  investors are obviously quite concerned about what’s going on on the regulatory front with usage-based billing so perhaps can you give us a sense of what . . . the impact of this could be should the government move forward on a more Draconian basis? (emphasis added, see page 12)

Fan was not alone in raising the issue. And Cope went on and on to assuage any concerns. But look again at the last line in Fan’s quote that brands any attempt by regulators to roll back the pay-per Internet model juggernaut would be “Draconian”. Clearly, investment bankers are not on the side of the ‘good and the just’, but their fears reveal cracks in the walls that may play well into the hands of those who do want to turn back the tide.

These are important things to bear in mind as the politics of the Internet unfold. I’ve said in the past that the CRTC is constrained by a heavy-handed and interventionist Harper Government. It is also constrained, apparently, by perceptions on Bay Street. It is also limited by its own timidity.

Nonetheless, there is scope for maneouvre in all this. So long as World of Warcraft players and Internet users of the world unite there may yet be opportunity to stem the tide. A quick search of the Internet shows that others around the world wish Canadians well in their battle against a model that they hope never sees the light of day in their own countries (or more correctly, hope that it never becomes the norm, as it is in Canada, as Professor Geist’s recent study shows).

Goldberg / Incumbent Report: Canadian telecoms — laggard or leader

This report by Canadian telecom economist and analyst, Mark Goldberg, takes aim at the growing perception that Canada has become a laggard in telecoms, internet and digital media policy generally.

I’m not sure exactly when it was written because it does not say.  While not buried altogether, the study, inconspicuously, acknowledges in footnote 2 that it is sponsored by several of the largest cable and telecoms giants in Canada: Bell, Rogers, Shaw, Telus, Cogeco and SaskTel. The source of funding behind the study is not suppose to be a big deal. Instead, the aim of the report, it states, is to ‘set the record’ straight.

For a study that takes a holier than thou attitude towards facts, this one is remiss in not even stating when it was commissioned and/or published.  The data is mostly vintage 2007 – 2009, but it is clear that it is intended to inform the heated debates now taking place in Canada. Mostly, it aims to replace the idea that rather than being a laggard, the telecoms and Internet industries in Canada, even if not a leader in anything, are not too bad either.  Its wishy-washy conclusions are meant to soften the case against Canada’s incumbent network providers for lacking in innovation, throttling the Internet, and dominating concentrated media markets.

None of these charges, it claims, are true.  But this is because, instead of dealing with actually existing markets and the real levels of competition/concentration in them, the Goldberg/Incumbent study invokes something called ‘intermodal competition.  This concept is fashionable amongst a minority of incumbent defenders and some economists.  This is not, however, competition between real players in really existing markets — i.e. the sponsors of this study — and their real share of these markets.  Instead, it refers to potential competition between different media technologies: cable, DSL/Telco lines, wireless, satellite. I have recently offered an overview of what things look like when we take actual market share into account (see here).  The conclusions are far different than the ones presented inthe Goldberg/Incumbent study.

Besides overlooking evidence on really existing markets, the study conveniently overlooks two other essential facts.  First, that the incumbent telco and cable companies’ serve 95% of the market.  Satellite and wireless technologies do account for some of the rest, but these technologies are not competitors to the incumbents, but adjuncts to, ahem, the operations of this study’s sponsors: Bell, Shaw, Rogers, Telus, Cogeco, SaskTel. Players in so-called MMDS wireless broadband Internet, notably Look, went belly-up a few years ago, although this too is ignored in this study. Thus, while most economists and regulators have thrown the ‘intermodal rivalry’ model overboard in the past few years, this study gives it pride of place.

The Goldberg/Incumbent study shadow-boxes with a 2010 study by Harvard U’s Yochai Benkler all the way through.  However, nowhere in the study is the Benkler Report mentioned or cited.  Here’s a link to that study.  It is far more comprehensive than this one, a product of an initial release in 2009, months of critique and revision before republication in 2010.  Unlike the Goldberg/Incumbent Report, the Benkler study is done by independent academics and is not sponsored by vested interests.

In contrast to the breadth of the sources cited by Benkler — OECD, ITU, Globcomm, Oxford University — Oveido University, etc. — across a much more comprehensive set of measures, the Goldberg/Incumbent study takes aim at OECD data, cherry-picks evidence from Stats Canada, the CRTC, Ofcom, FCC, etc. and relies on sources that are generally supportive of its position. Such supportive studies are well represented in those cited from, for example, authors affiliated with the Progress and Freedom Foundation as well as the Information Technology and Innovation Foundation in the U.S.

The Goldberg/Incumbent study relies heavily on a study by Scott Wallsten of Stanford U in the US.  It was originally done in 2008.  If scholarly citations are any measure of success, it’s 8 citations (according to Google) pale alongside the attention drawn by the Benkler Next Generation Connectivity report.  Throughout the Goldberg/Incumbent study, minor sources are put alongside more credible sources, as if putting them side by side makes them equal.

Wallsten does have an axe to grind. He is, among other things, a senior fellow at the Progress and Freedom Foundation, a libertarian think-tank that always lines up four-square behind ‘free markets’ and new technology every time, and is of the school that there was never a monopoly worse than State intervention. Wallsten’s study appears alongside references to others from the Information Technology and Innovation Foundation (ITIF), another group highly deferential to incumbent telecom and cable interests in the US, and deeply suspicious of government intervention.

The Wallsten paper as well as one presented by Robert Atkinson of the ITIF last year at the highly-regarded Telecommunications Policy Research Conference at George Mason U Law School (Arlington, Va) last year represent the stance of writers who are unavowedly in favour of incumbent driven broadband telecom and Internet development. It is also from such authors that the ‘intermodal competition’ concept versus real competition in the marketplace is borrowed.  The basic thrust of these authors, and of the Goldberg/Incumbent Report, is that, given enough leeway to do as they please, the dominant providers will invest sufficiently in networks for everybody who seeks it and at sufficient levels to meet consumer demand.

The lack of access in Canada, to the extent that it is a problem at all, is a ‘demand’ side problem, rather than a supply side one. Canadian prices are relatively affordable.  As the Goldberg/Incumbent study states, comparisons between advertised specials in Canada and the OECD reference study that it takes aim at shows that the OECD’s data is flawed.  It overstates the cost of high-speed Internet service in Canada, while under-stating the bandwidth, speed and other capabilities of Internet connectivity in Canada.

The problem with this conclusion is, first, taking the OECD data as the main referent points selectively picks from one study among the wide range of studies available.  Second, taking ‘best advertised prices’ for Internet services currently available on ‘the market’ is silly.  This is because such ‘specials’ come and go; they also expire after the promo period, followed by lock-in periods, and penalties for early withdrawal.  All of these things, as Timothy Wu pointed out nicely in a recent Globe & Mail article, basically extend the same loathed practices of the cellphone carriers (who, again, are one and the same as those sponsoring this study) to the Internet.

This is to say nothing of acceptable user policies that contain more limits on what people can and cannot do with their connectivity than could be admitted in the most draconian of states with even a hint of pretense that people’s freedom of expression and privacy rights deserve respect. Far beyond bandwidth caps and so-called over-usage charges lay the assertion by carriers of broad editorial authority over users content, ownership of user-created content, limits on the ability to attach certain devices (servers) or run certain applications (news feed, multi-user processes, etc.), the right to use deep packet inspection technologies to manage communication flows, and so on and so forth.

In the Goldberg/Incumbent report, these concerns are dealt with and dismissed in chapter five, which covers issues of network neutrality, government intervention and the potential for government ownership of broadband Internet providers. Network neutrality is, states the report, a kind of propagandistic, populist ploy — i.e. who can be against something that is ‘neutral’ — and the CRTC is praised for being wise enough to have rejected the terminology in favour of the, ahem, really neutral language of “Internet Traffic Management Practices” when these issues came to a head in 2008-9.  Vertical integration, economies of scale and scope, and the leeway to devise whatever ‘business models’ they desire are the keys to success, according to the report.

A less beholden report might point to Jacques Ellul and a different kind of propaganda: one that puts you to sleep by obscure language and a mountain of technical detail that makes your eyes glaze over and your brain go to sleep.  That is the language of the CRTC, this report, and those who want to junk not just the language of Network Neutrality, but the principles and values that it stands for.  Funny thing is, I don’t much like the concept of ‘network neutrality’, either.  This is because I prefer common carriage and the history of that concept, largely because it reminds us that common carriage was the status quo for most of the 20th century and was sp because it is generally a bad idea to let those who control the medium to control the messages flowing through it.

The Goldberg/Incumbent report is right that economies of the scale are propelling a certain sense of scale, or bigness, and that this can sometimes be good for investment.  However, while digitization magnifies economies of scale for certain things, claims regarding economies of scope as justification for the creation of fully integrated media conglomerates are mistaken.  Moreover, even if bigness was the result, that might be reason to step in to turn back the tide.

All of the major incumbent telecom and cable companies now systematically regulate the contents flowing through their pipes. The question is whether this is only for some ‘peak’ hours of the day (Bell) or all day long (Rogers)? Bell’s abysmal experience with so-called convergence between 2000 and 2006 should give us little comfort in its ability to run CTV today. The fact that bandwidth caps and UBB tilt the playing field against Netflix, Apple TV and amateur video (YouTube) alike just at the time the companies are ramping up the presence of their on online video services is indication enough that the marriage between the medium and the message gives an inherent bias to the incumbent’s to discriminate in favour of their own services and against those of others.

While this is the case for Bell, Rogers, Shaw, Videotron and Cogeco, for example, the examples of Telus, SaskTel, MTS, Bragg Cable, etc. shows, and indeed others around the world, that there is no reason for those who own the pipes to also own television programs, music, films and other ‘content’.  AT&T in the US and Vivendi in France showed the folly of this earlier this decade and in the late-1990s. Most of the US major telecom players no longer are tightly aligned with Hollywood, as they were in the mid-1990s, and haven’t been in the last 10 years.

Lastly, the Goldberg/Incumbent report claims to not be for anything one way or another when it comes to government intervention, but the thinness of that claim is readily transparent.  There is a sense of urgency underpinning the report regarding what it seems to see as darkening political clouds on the horizon.  It applauds the Government’s willingness to intervene to set back CRTC decisions that run opposite the incumbents (e.g. Globalive), but elsewhere cautions that the slightest of intervention in Canada’s telecom and Internet markets will deter investment, respond to problems that don’t really exist, and worse.

Chapter five in the Goldberg/Incumbent report seems to see the potential for extensive government intervention along the lines adopted in Australia, Korea, Japan, Sweden, Britain, NZ, and a whole lot of other places as a possible doomsday scenario if it ever took hold in Canada. Australia’s decision in 2009 to develop the National Broadband Network Company to bring ‘next generation networks’ to nearly 95% of Australian homes is seen as being born of conditions so different than those in Canada that it is not even worth discussing anything similar in Canada.

At separate places in the report, the Australian venture is stated as involving an investment of either $31 billion or $43 billion. The original announced amount was the latter. Either way, the amount is indeed significant — the biggest public works project in Australian history, actually. However, for a report that is holier than thou about numbers, small errors when it comes to basic figures raise questions about the analysis in the report as a whole.

While the Goldberg/Incumbent report tries to place Canada along side the US in terms of approaches to ‘stimulus spending’ on broadband Internet development, the current government’s pledge of $225 million over the next few years to bring broadband Internet development to rural communities pales alongside the US’s plan to spend $7.2 billion on such initiatives, or Korea’s $24.6 billion or Australia’s $43 billion.

If it is Canada’s low population density and sprawling landmass that is responsible for any lags in Canada’s network development, as this report so often claims, than we would expect that investments to overcome these obstacles might be higher by international standards, not lower. The fact that Britain, a country with twice the population but a fraction of the landmass, is spending $830 million, or more than 3 times Canada, suggests that the link drawn between population density and the cost of network development is overblown in the Goldberg/Incumbent report. In fact, this attempt to shift the debate onto the terrain of geography and demographics is a red-herring. This is because a huge proportion of us live in relatively small number of large metropolitan cities (Toronto, Vancouver, Montreal) and then along a thin band running parallel to the border.

Overall, the Goldberg/Incumbent report diverts attention from many of the key issues and suggests that, all things considered, we’ve got it pretty good in Canada. Competition between technologies is substituted for real competition in the market place. Weak data sources are made the equivalent of good ones. The time and source of this study itself are either missing or buried in a footnote.

Overall, the Goldberg/Incumbent Report is part of the oncoming onslaught to hold back the ‘populist’ and political tide that has once again risen to the fore and demanded a more open, competitive and free media system. The report applauds the Government for holding back that wave so far and avoiding the populist path (see page. 55). That says much about its own political stripes, despite its attempts to cloak those stripes behind a veil of neutered facts and sterile language.  We will see many more of these kinds of initiatives in the upcoming days, weeks and months ahead.

%d bloggers like this: