Blang!

If anyone had doubts about the impact Google is having on the mobile space, the Mobile World Congress (MWC) should have put those doubts to rest.

Ad revenue from Android phones are the fastest growing segment of the mobile ad space and mobile carriers are starting to make some disturbing pronouncements such as Vodafone chief Vittorio Colao declaring that they may start to charge search engines for access to their network. Cell phone carriers are true “bellheads“. They just can’t fathom a network where they don’t control every aspect of it. I’m just dieing to see what happens when Vodafone cuts off their customers from Google (”What? Your network doesn’t have ‘The Internet’?!?!).

But I digress. The point of this post is that even though the iPhone still gets all the media attention, Google’s Android is the one gaining market share and making the most waves in telecom circles.

And it won’t stop there. Android’s openness is poised to make it the most disruptive technology this decade. Unlike the iPhone which only runs on devices developed, sanctioned and released by Apple, Android can run on anything. Soon it’ll be popping up not only on phones, but netbooks, laptops, TVs, desk phones and absolutely anything that device manufactures want to put an interface on.

Android won’t just challenge the smart phone market, but it has the potential to make inroads into every consumer technology out there; tipping over everyone’s apple cart as it goes.

As predicted, the government mismanagement of the technology portfolio is turning into a disaster that just keeps on giving. Today, the first lawsuits was filed. To my surprise, it was one of the new entrants, Public Mobile who launched the first lawsuit (I expected it to be one of the incumbents).

Public Mobile is complaining loudly that granting Globe Alive a one-time exception to the foreign ownership rules puts it at a major competitive disadvantage. No kidding. One company can draw on a massive pool of foreign investment capital, and the rest can’t. It’s completely unfair.

Not only unfair, but bad for Canada. Since the rest of the new entrants didn’t have access to as foreign capital, they weren’t able to bid as high as they would have or buy as much spectrum as they might have to become significant national competitors.

How much higher would the bidding have gone? How much money did the Conservatives throw away at the auction by not allowing more bidders? Given that the auction went into the billions, it’s a safe bet that Canada is out “billions”. A disaster and a scandal of epic proportions.

Thank goodness parliament prorogued or the Conservatives might have to answer for their actions.

Time and again, the Conservative government has demonstrated it is completely clueless when it comes to technology policy.

Case in point, one of the first things the Conservatives did was to ignore recommendations to lift foreign ownership restrictions in the telcom sector. That recommendation was originally in a report commissioned by the Liberals so instead of following it, they commissioned their own report which came to the same conclusion.

Having received the same recommendation from both Liberal and Conservative reports, they did the only logical thing and ignored(?) them both…

Instead, the Conservatives opted to plough head-on into “free” market disaster.

Foreign ownership can be a political hot-button in Canada so the Conservatives attempted to duck the issue by pressuring Industry Canada to approve the ownership structure of Globalive despite the fact it clearly didn’t meet the requirements.

This back-door decision making conveniently avoided the inevitable public discussion of foreign ownership policy and neatly ducked any political fallout. Problem avoided. Or so they thought…

Industry Canada can get away with making their decision in relative secrecy but the CRTC can not. The CRTC must issue its decisions publicly along with the accompanying rational and background information. So, faced with a complaint from the incumbent cell phone carriers, the CRTC had no choice but to conclude (correctly) that Globalive does not meet the ownership restrictions.

In the mean time, Globalive has spent hundreds of millions on spectrum and infrastructure.

So the government choices are now this:

1) Overrule the CRTC (again) resulting in:

a) A public dressing down of Industry Canada (for approving Globalive in the first place) and the CRTC (for not going along with the program).

b) A government admission that ignoring the recommendations to lift foreign ownership restrictions was bungling of the highest order.

c) A lawsuit by the incumbent telcoms (which they will win. After all, even if the Conservatives overrule the CRTC, Canadian law still states they must be Canadian owned).

2) Let the CRTC ruling stand resulting in:

a) A public dressing down of Industry Canada (for approving Globalive in the first place) and the CRTC (for not going along with the program).

b) A lawsuit by Globalive to recover their investment plus damages, a figure that could approach 1 Billion.

c) No real competition in the near future.

3) Change the law on foreign ownership resulting in:

a) See all above.

What a disaster. I can hardly wait to see what they do next.

Canada’s cable companies today filed comments with the CRTC in which they release the results of a study the conducted into the residential VOIP market in Canada. In short, it found that residential VOIP “failed to catch on” and that “market research reveals a market in decline, rather than one in the throes of expanding”.

The filing also lays a beating on the other parties involved in the proceeding. With regard to the CRTC, it says “this proceeding has become a textbook case of how not to make a well informed regulatory decision”. It lays blame for the fiasco at the feet of the PSAPs and ILECs saying “The [ILECs] have kept the CRTC, and interested parties, completely in the dark” and that the PSAPs were “Similarly [...] unhelpful in this regard”.

When I was the president of the (now disbanded) Canadian Association of VOIP Providers, this is exactly what we were saying. My only regret is that it took the cable companies this long to finally wake up.

Aside from the above, the submission goes on to provide some very interesting statistics which seem to indicate that residential VOIP is in steep decline. Citing a study done in the U.S., only 0.0064% are from Nomadic VoIP customers and the number has been steadily dropping since 2007. Many of the major providers of VOIP have shuttered their VOIP service in Canada (including Vonage). Canada has only 90,000 VOIP customers who use the service as their primary phone service (the rest use it just for long distance or to suppliment wireline or wireless service).

While residential VOIP is certainly dead, VOIP on mobile devices is poised to explode and 911 calls on mobile devices can be made to work through the traditionall cellular system. Assuming Canada ever gets a location system for cell phones, this should make for a safe and effective emergency system.

Update: For the curious, I have uploaded the entire document here.

Canada’s equivalent of the US’s FCC, the Canadian Radio and Telecommunications Commission (CRTC) released a highly flawed decision that gives Canada’s ISPs the green light to shape and throttle internet traffic.

The reaction from consumers has been swift and negative. At the time, this was the most commented on story on news sites (CBC story) and blogs and are running nearly 100% against the decision. Has the CRTC finally screwed up so bad that the government will be forced to intervene? That seems unlikely given that the media has labeled the reaction to the decision as “mixed”. Unfortunately, even typically reliable commentators such as Michael Geist have flubbed their analysis of the decision.

Setting aside all the heated rhetoric, here is why the CRTC decision is critically flawed. The CRTC has said in essence that:

Throttling is ok because consumers had a choice back in 1999.

This is the most astonishing part of the decision. Apparently the CRTC used its assessment of competition done in 1999 as the basis for deciding that consumers have so much choice that market forces will take care of any problems.

I’m not making this up! In the “Background” section of the decision, the CRTC outlines the pillars on which it built its decision starting with competition (or “market forces” as it’s sometimes called).

12. “The Commission notes that in … Telecom Order 99-592, it concluded that the retail Internet service market was sufficiently competitive to protect the interests of users.”

Telecom Order 99-592 was issued in 1999! In the 90’s the vast majority of Canadians got their internet from dial-up. Back then, the Internet market was competitive as is characterized by this statement from the order:

5. “… the Commission found that the retail IS market was characterized by intense rivalry among competitors in terms of aggressive marketing techniques, innovative service offerings and price competition.”

None of those statements are true today. Beginning around the time the order was issued, Canada’s large incombents suddenly woke up and realized they might face competition. Inside only a few years they bought up the small independent dial-up ISPs and the remaining ones were slowly made obsolete with the advent of DSL and Cable broadband offerings.

Today there are no truly independent ISPs. The ones that do exist are actually just resellers of service from one of the incumbents (Bell), or a cable company (Rogers).

And that was just on the retail side. The back-bone providers suffered a similar fate. Also from order 99-592:

5. “… The Commission also found that there were few entry barriers into retail IS markets, and that a large number of service providers, ranging in size from small local independent operators to large multinational competitors, had entered the market in a relatively short period of time.”

Today, the entry barriers are massive. First up, who can afford to run wires to every single household? Even if someone could afford it, they’d still have to buy internet connectivity from either the incumbent telcom or cable company so effectively they’d still be just resellers.

“Large multinational competitors”? Gone. In the 1990’s, companies like Sprint and AT&T invested heavily to build high speed networks but Canada’s anti-foreign ownership rules prevented them from fully owning their own networks. Just like in the retail space, Canada’s large incumbents and cable companies slowly acquired their networks. Even the small competitors are now gone (MTS bought Allstream for example).

So one of the primary justifications given by the CRTC as to why throttling is acceptable is because consumers have a choice but they based that on an assessment of the market done in 1999… Ouch…

Throttling is ok because the only applications worth getting quickly are real-time audio and video

The CRTC says it’s ok to throttle because only “real-time” applications should be safe from ISP tampering, everything else isn’t important enough to warrant protection.

126. “Accordingly, the Commission finds that use of an ITMP [Internet Traffic Management Policy] resulting in the noticeable degradation of time-sensitive [defined in 125. as "real-time audio or video such as video conferencing and voice over Internet Protocol"] Internet traffic will require prior Commission approval under section 36 of the Act.”

127. “With respect to non-time-sensitive traffic, the Commission considers that the use of ITMPs that delay such traffic does not require approval.”

This logic is flawed on several counts. First, the commission has put itself in the position of deciding what data is worthy of freedom. Does the CRTC really think its crystal ball is clear enough to pick Internet winners and losers?

It further compounds it’s mistake by citing specific examples such as “real-time audio or video”. Why does the commission think real-time audio and video is worthy of a throttling exemption but not other applications? What about online gaming? What about non-real-time audio and video? And who’s to say that quick web page loading or email delivery or any number of other applications aren’t just as important to some users as “real-time” audio and video?

This puts innovators at serious risk. Lets say you were thinking of setting up an online movie download business. If you want to compete with rental stores, movie download times have to be reasonably short so your software quickly and efficiently delivers movies using aspects of Peer-2-Peer technology. Under the CRTC definition, this is not “real-time video” so the ISPs are free to throttle it and next thing you know  your customers are very unhappy with the slow speed of the service and your business gets a reputation for being slow.

Oh, and did we mention that both Bell and Rogers just happen to have competing offerings that benefit from this? Rogers has both “Video on demand” (via cable) and “Rogers Video” (retail stores). Bell has it’s own movie download service not to mention “Bell Expressview”.

What about Google? Google’s entire business model is based on “cloud computing”. Put simply, cloud computing moves applications from your local machine to the interent. Applications like GMail and Google Docs absolutely rely on quick response times. With this ruling, ISPs can give their own email services priority over Google’s.

The potential for tampering with competitors online services is staggering, but apparently that’s A-OK with the CRTC.

It’s ok to throttle because you have choice (except for section IV of the decision where we ensure that you don’t).

So after emphasizing traffic management is ok because of “consumer choice” and “market forces”, the CRTC then goes on to ensure that the limited choice you do have won’t actually be a choice at all. In section IV “Regulatory approach for wholesale services” the commission grants wholesalers such as Bell the right to shape the traffic of their resellers effectively making it identical to Bell’s own retail Internet service.

81. “No prior Commission approval is required with regard to [ITMPs that are not more restrictive than the primary ISP’s treatment of its own retail Internet services].”

Conclusion

We actually can’t blame the CRTC for this debacle. In fact the CRTC makes it clear in a section called “Policy Direction” that it’s hands were tied by the Conservative government’s policy direction to the CRTC. One of the first things the Harper government did when it came to power was to issue a policy directive to the CRTC which in effect instructed not to regulate based on the best public policy, but instead to do as little as possible and let “market forces” take over.

This of course was one of the most idiotic things our government has done given that in the telcom space, the only “market force” we have is a duopoly (Telcoms & Cable). Worse still, these two players also have deep interests in delivering content. So not only do they have little to no motivation to compete for Internet customers by improving service, but they actually have a vested interest in keeping speeds slow to prevent them from competing with traditional content delivery such as TV and pay-per-view.

How much further Canada can slip behind before our government takes action? I’m at least heartened to see that Canadians are starting to wake up and that technology related issues are now becoming political hot-button issues (much to the surprise of politicians). I’m willing to bet that during the next election, technology issues will play an unprecidented role.

In response to CRTC notice of consultation 2009-129 paragraph 20,  I filed with the CRTC “A Framework for Emergency Calling in Canada“. This document describes a functional archetecture for location determination during emergecy calls placed from VOIP endpoints.

“Canada’s two biggest phone companies are skirting their historic rivalry to team up on their second partnership within months, as they struggle to find ways to boost profits.”

I couldn’t help but laugh at the first line of this Globe & Mail story. “historic rivalry” ?!? Surely that was supposed to be sarcastic? Bell & Telus are partners in every aspect of the telcom business in Canada. They have a token presence in each others territories just so they can make some sort of claim about sufficient comptetition in Canada but they actually never compete with each other.

MTS released a zinger of a press release today attacking Bell and Telus. Here is a couple of highlights with my comments:

“Granting the Bell and Telus request would also put Canada directly at odds with the emerging international consensus that an open access model is the optimal means for broadening competitive choice for broadband customers.”

Open access?! This must have been written by someone on the Allstream side of the business because you can reset assured nobody at MTS even knows what open access means. But wait! It gets better:

“Compared to most of the industrialized world, Canadians already pay higher prices for slower Internet speeds.”

And nowhere is that more true than in MTS’s home territory. If MTS is so eagar to provide faster, cheaper internet, why don’t they start with Manitoba?

I’m floored by these statements, not because they’re wrong, but because they’re 100% right! MTS continues to be the beast with two heads. The Allstream head is a “nethead” that gets this whole internet thing, and the MTS head is a “bellhead” that represents the worst of “big telco” arragance and poor service.

I’m just glad that someone at Allstream understands what’s at stake and is doing something to counter the rest of the ILECs. Maybe there is hope for Canada after all?

In recent posts I’ve been lamenting the lack of the “perfect device” (one that’s the size of a phone but has capabilities of laptop, including docking to a mouse, keyboard & monitor). I’ve also debated which of the major companies would win this battle (Microsoft, Google, RIM, or Apple). I’m ready to declare a victor.

And the winner is (or will be); Google Andriod!

Even though Andriod has yet to have any major devices make it to market, the momentum is now unmistakable. Motorola, Nokia, and Samsung have phones released or in the works; but more importantly, so do companies like Acer (who just announced that they are working on several Andriod devices) and HP. That’s the critical cross-over that will win this fight. The openness of Andriod means it will dominate the vast majority of devices ending the iPhone and Blackberry dominance.

The only things standing in the way is to crack the Telcom dominance over wireless data.

If it wasn’t already obvious how badly Canada needs to lift it’s foreign ownership rules, this week, the Toronto Star is reporting that Telus has demanded that the CRTC re-examine how much foreign ownership there really is in new wireless entrant Globealive.

The ILEC’s know that there is no Canadian owned company that could afford to build a new wireless network big enough to compete and that’s why Telus is raising a red flag over Globalive. It well knows that no foreign company would pour hundreds of millions of dollars into building a wireless network it doesn’t own and my hunch is that Telus is right. There is something fishy going on there and the government should do something about it. It’s just that what I think the government should do isn’t what Telus wants.

Lets lift these ridiculous foreign ownership restrictions once and for all and get on with finally building a better, more cost effective network. If Globalive really is pulling a fast one with foreign money, then it isn’t fair to the other new wireless entrants who are playing by a stricter set of rules.

It’s also worth noting that the Canadian wireless spectrum auction that generated so much more money than expected, did so because foreign companies bid the prices up so high. If Canada really wants to get “fair market value” for it’s wireless spectrum, then by definition it needs to have a fair market. That means a market that isn’t artificially restricted by outdated ownership rules and where competition drives prices down so us Canadians get to use our public airwaves at a reasonable price.