Canadian watchdog ponders an MVNO invasion

The Canadian Radio and Telecommunication Commission (CTRC) has completed the first stage of its competition review as the watchdog ponders the competition conundrum in the country.

Between February 18 and 28, the CTRC heard evidence from numerous industry executives as the watchdog aims to improve the connectivity landscape for Canadian consumers. Preserving scale but inspiring competition is an interesting equation to balance, and in Canada, it could result in the encouraged creation of wholesale agreements. The land of Mounties and maple syrup could see an invasion of MVNOs in the near future.

“First, we will examine the state of competition in the mobile wireless market and whether further action is needed to improve choice and affordability,” said Ian Scott, CTRC CEO, during the opening remarks in February.

“Second, we will consider whether mobile virtual network operators, also known as MVNOs, should have mandated access to some or all wireless service providers’ networks and, if yes, subject to what considerations. On this matter, the CRTC’s preliminary view is that the national wireless service providers (Bell Mobility, Rogers and Telus) should be required to provide MVNOs with wholesale access to their networks, subject to certain constraints.”

The issue which remains at the heart of this situation is whether there is a fair deal for the Canadian consumer. As it stands, most Canadians are happy with the service provided, though prices are a worry. Tariffs have been increasing in recent years and it does look like a trend which will continue.

Canadian authorities have generally given the industry the benefit of the doubt, largely allowing an environment of self-regulation, though now it appears it needs to step in. Canada might have excellent network performance, but it is not presenting the consumer with a fair deal.

Country Average Price per GB (US $) Average download speed (Mbps)
Canada $12.02 28.76
USA $12.37 32.89
UK $6.66 22.37
New Zealand $9.79 32.72
Australia $2.47 16.36

Stats curtesy of Cable.co.uk

Download speeds in Canada would be deemed perfectly acceptable, even fast to some nations around the world, but the digital economy does have a very high barrier to entry.

What is worth noting is that this is not the first time the Canadian watchdog has had to step in, seemingly admitting the telco industry is not capable or mature enough to look after its own interests in a fair and reasonable manner. The CTRC has to intervene in 2015 to set up a roaming framework between the telcos, change regulations to lower the cost of SIM-only deals and make wireless voice and internet services part of the universal service objective to ensure continued network investment.

What is of course worth noting is that the status quo is firmly set against any change in the market. Telus, Bell and Roger have a comfortable position, with each telco collecting healthy profits; why would these giants want the prospect of increased competition to lower tariffs and potentially erode the profit margin?

The outcome of this review will hopefully be set rates to force the established telcos to offer wholesale services to MVNO entrants. This is a market where competition is stagnant, while the high barrier to entry makes it highly unlikely another MNO will appear in the foreseeable future. MVNOs are probably needed to disrupt the market and provide suitable competition, but it remains to be seen how effective the lobby efforts of the traditional telco interest is.

Huawei elects Canadian courtesy over US aggression

Huawei founder Ren Zhengfei has said the R&D business unit in Silicon Valley will be uprooted and relocated to Canada.

The closure of R&D functions in the US should come as little surprise considering the Entity List and President Trump’s xenophobic tendencies, though the Canadians will be pleasantly surprised at being selected.

“The research and development centre will move from the United States, and Canada will be the centre,” Ren said to Canadian newspaper The Globe and Mail.

“According to the US ban, we couldn’t communicate with, call, email or contact our own employees in the United States.”

Although the specifics have not been unveiled, Huawei has had to let go of some employees as a result of the ban on working with US companies, and this news will not be welcomed by the remaining. Huawei will continue its presence in the US, it is still in the courts fighting the US Government, though it does appear the bulk of operations will be shifted north to the politer side of the border.

What impact this will have on the relationship between the US and Canada remains to be seen. Although the Canadians would have gained some favour in during the arrest of Huawei CFO Meng Wanzhou, relations have been often strained between Trump and Canadian Prime Minister Justin Trudeau.

Last October saw the end of tension between the two nations ended as the duo came to a trade agreement. Once again, Trump was throwing his weight around, but this time it worked, as Trudeau bowed to pressure easing barrier to entry for US firms into the Canadian diary market.

Canada is an interesting country for Huawei, as there is no official, long-term position for the firm in the communications infrastructure ecosystem. The Government is yet to make any concrete statements, though as there are existing relationships with some of the telcos, there is a lot on the line.

In February, Telus said its 5G deployment strategy would be delayed by a Huawei ban. The company uses Huawei radio and optical transmission equipment for its 3G and 4G networks and continues to believe the company does not present a national security risk to Telus or its customers. Bell has said it would not be convenient but not the end of the world, which Rogers primarily works with Ericsson.

For Huawei, this could be a very positive move. Opening an R&D lab in the country could bolster relationships in a new market as it is quite clear there will not be any material wins in the US.

Huawei CFO updates her prison diary

Meng Wanzhou, the Huawei CFO being held in Canada awaiting deportation to the US to stand trial, had publicly reflected on her challenging year.

Published on the bit of the Huawei site reserved for broader publicity initiatives such as CEO interviews, Meng’s account is headed ‘Your warmth is a beacon that lights my way forward’. That sets the scene for a narrative focused on how tough the year since her arrest in Canada has been. She contrasts her busy life as a Huawei exec with her boring one under house arrest, in which she has so much spare time that she can now read books and even do some painting.

The warmth referred to seems to be messages of support from Huawei colleagues on the company’s internal messaging board and the crowds that turn up whenever she appears in court. On top of that even people delivering take-aways to Huawei campuses have left messages of encouragement such as “Go Huawei!” and “You can do it, Huawei!”

The prison diary is careful to send good vibes to her captors, from the Alouette Correctional Center for Women, to her security entourage, to the staff of the court she periodically attends. All this, says Meng, has given her the strength to keep on keeping on. “I’m no longer afraid of the rough road ahead,” writes Meng. “While my personal freedoms have been limited, my soul still seeks to be free. Amidst these setbacks, I’ve found light in the life around me.”

While we have no reason to doubt Meng’s sentiments are anything other than heartfelt, the fact that Huawei chose to publish this letter on its propaganda site does make you question the thinking behind the whole exercise. Huawei is clearly on a publicity drive ahead of Meng’s extradition hearing next month and its PR people have also taken the trouble to flag up this fairly accommodating piece on the matter from a Canadian publication. If Huawei is hoping to generate sympathy for Meng’s plight it might need to be a bit more subtle than this.

Huawei mobilizes is North American legal team once more

Embattled Chinese telecoms giant Huawei is reportedly going to challenge a recent FCC proposal, while there have been developments in the trial of its CFO in Canada.

Last month US telecoms regulator, the FCC, indicated it wants to ban Chinese vendors from receiving any money from its Universal Service Fund. Last week it formally proposed new rules ‘to remove bad actors from commission programs’. Specific bad actors weren’t identified, much to Hollywood’s relief, but the rules were clearly made with Chinese vendors in mind.

Now, according to the WSJ, Huawei is preparing a lawsuit to challenge the decision, with a formal announcement imminent. On the surface legal action such as this seems utterly futile, since the entire US state is clearly hostile to Huawei. But the US is supposed to have an independent judiciary devoted to due process, so anyone should be entitled to the safe treatment under the law, regardless of the political environment.

Meanwhile Huawei will also be hoping for impartial legal treatment in Canada, where its CFO Meng Wanzhou is under arrest, pending extradition to the US to be tried for a bunch of alleged crimes. The extradition hearing is due to take place in January and the CBC reports that Meng intends to ague that the crimes she is accused of don’t even exist.

“Initiating extradition proceedings in these circumstances would undermine Canada’s sovereignty and its independence on the world stage,” Meng’s lawyers reportedly reckon. “It is simply not Canada’s role to enforce American foreign policy through our laws, especially when such foreign policy is diametrically at odds with our country’s chosen legal framework.”

The core of the defense appears to be around ‘double criminality’, which means the act has to be a crime in both countries for extradition to be permitted. They seem to be saying financial deception Meng is accused of can’t be a crime in Canada because the sanctions it was supposedly designed to circumvent were US, not Canadian ones.

Canadian complaints give regulator more ammunition for new telco

The Commission for Complaints for Telecom-television Services (CCTS) has said complaints against the telcos are at an all-time high, just as competition authorities are building evidence.

Usually annual complaints reports do not grab headlines, but this report needs to be placed into context. Earlier this week, the Canadian Competition Bureau has suggested new regulations should be introduced to encourage new entrants in the telco space, breaking the over-arching dominance of the ‘Big Three’; Bell, Telus and Rogers.

Looking at the CCTS report, for the last 12 months the Commission received nearly 19,300 complaints from telecoms customers, an all-time high for the organisation’s history.

The report suggests there is also a 42% increase in the number of service provider violations of the Wireless Code, most notably failure to provide important documentation to customers and to provide proper notice before disconnection of service. Complaints against Rogers increased 26.5% year-on-year, Telus’ jumped 70.6%, while Bell’s increased 24.2%.

Complaint Percentage of total
Billing issue 43.1%
Contract dispute 32%
Service delivery 21.8%
Credit management 3.1%

Looking at the long-term trends, complaints about wireless services have increased 90.6% over the last five years. The number of complaints about wireless on the whole increased year-on-year 53% for 2018/19, and accounts for 41% of all complaints directed towards telecoms and TV service providers.

Telco Number of complaints Percentage of total
Bell Canada 5,879 30.5%
Rogers 1,833 9.5%
Telus 1,610 8.3%
Virgin Mobile 1,253 6.5%
Freedom Mobile 1,253 5.9%

Telcos are traditionally very poor when it comes to customer service and delivering on the promised experience, so the poor performance described in the report will come as little surprise. However, those who are pursuing the introduction of new regulations to encourage additional competition will find the results very helpful.

As mentioned previously, the Canadian Competition Bureau has submitted a report to the Canadian Radio-television and Telecommunications Commission (CRTC) questioning whether the industry is in a healthy position. The report requests additional regulation which would encourage the creation of more MVNOs, as well as follow-ups which would assist these MVNOs in deploying their own, independent, scaled-networks. Ultimately, the Competition Bureau wants more competition across the country.

In general, competition authorities only pursue additional competition in markets when the status quo is deemed unsatisfactory. Introducing new dynamics are a means to ensure the consumer gets a fair price and a satisfactory service.

In the report submitted to the CTRC, the Competition Bureau suggests prices are 35-40% lower in regions where there is additional competition to drive the ‘Big Three’, and this competition only have to grab 5-10% of market share. Add the increased number of complaints into the equation, and the case for a competition shake-up in the Canadian market becomes stronger.

Canadian MNO/MVNO ARPU ($)
Bell Canada 51.05
Rogers 41.57
Telus 49.69
Freedom Mobile 28.47
Videotron 29.66

These are still the early days, but we suspect after a public consultation, efforts might be made to introduce additional competition into the market. This could mean forcing the existing telcos to lower wholesale costs to encourage the creation of new MVNOs in the short-term, it could also mean financial/regulatory assistance for these MVNOs to free-up capital for the deployment of infrastructure.

Another worrying development for the Canadian telcos is the up-coming 3.5 GHz spectrum auction which will take place next year. This is valuable spectrum for future 5G services, and should authorities want to introduce new competition, said competition would want a slice of the 5G airwaves. Perhaps limits will be introduced to the amount of spectrum the ‘Big Three’ can buy, and maybe it will be offered at discounted rates for new-players who commit to aggressive network deployment plans.

Country Price per GB ($) ARPU ($)
Canada 12.02 37.95
United Kingdom 6.66 17.65
United States 12.37 32.38
France 2.99 12.37
Japan 8.34 29.52
Australia 2.47 23.29

These are all guesses for the moment, though we strongly suspect Canada might be heading towards a situation where it wants to create additional competition. Prices are high in Canada in comparison to the rest of the world, $12.02 per GB a month and ARPU of $37.95, which is always a negative sign. Admittedly, the Canadian landscape makes it difficult to deploy networks cost-effectively, but the regulator wants to ensure the consumer’s wallet does not take too much of a beating.

It is unlikely to happen in the short-term, but the signs are not looking good for the status quo. The evidence is starting to point towards the need to introduce more competition in the Canadian telecoms market.

Canada preps the industry with hint of regulatory disruption

The Canadian Competition Bureau is suggesting competition is not healthy in the country and new regulation could emerge to encourage the creation of new challengers.

Having submitted initial feedback for a Canadian Radio-television and Telecommunications Commission (CRTC) review, the competition agency is suggesting significant market power for Bell, Telus and Rogers in most regions across the country, which could mean retail connectivity tariffs are 35-40% higher. Regulators are often very sensitive to when the consumer’s wallet takes unnecessary damage, especially when it comes to a concentration of competition.

For the moment, these comments will not mean too much, though the telcos should keep a wary eye on the situation. The Competition Bureau has pointed to the presence of regional challengers, such as Sasktel, Videotron and Freedom Mobile, as having a positive impact on prices for the consumer, perhaps offering ammunition for the CRTC to force through regulatory disruption.

Country Average price per GB ($) Percentage of monthly income
Canada 12.02 0.322%
Australia 2.47 0.056%
New Zealand 9.87 0.288%
UK 6.66 0.193%
USA 12.37 0.236%

Canada’s connectivity prices are by no-means the highest worldwide, but in comparison to the other members of the ‘Five Eyes’ alliance, they are expensive. Only the US telcos charge more per GB on average, though US consumer wallets maybe more tolerant to higher prices thanks to higher incomes.

The feedback from the competition watchdog seems to be suggesting a regulatory framework which would not be welcomed by the Canadian MNOs. Allowances could be made for MVNOs to enter the market, though the regulatory landscape could well be adjusted to aid the same companies in creating their own scaled and independent networks to compete alongside the ‘Big Three’.

“The CRTC should allow wireless disruptors to act as MVNOs as a transitional step to becoming full-fledged facilities-based providers as they continue their expansion,” the Competition Bureau’s submission suggests.

“This would ensure that the progress made by these providers to date will continue to pay dividends to Canadians. An investment-based MVNO policy achieves the goal of spurring additional price competition from wireless disruptors in the short term, while avoiding the risk of declining network quality in the long term.”

The issue which Canada faces here is a simple to understand but very difficult to overcome. Telecommunications is a very CAPEX intensive business at the best of times, but when you throw in Canada’s expansive and often aggressive environment, introducing a new player becomes even more difficult.

Should Canadian authorities want to encourage the growth of scaled competitors for the ‘Big Three’ there will need to be assistance. This might take the form of forcing lower wholesale prices on the current MNOs, as well as more direct regulatory/financial assistance for the challengers. Interestingly enough, next year’s 3.5 GHz spectrum auction could cause some headaches.

As we have seen in other markets, Germany for example, regulators have a tendency to use spectrum auctions to rebalance the distribution of power. With 3.5 GHz being viewed as an incredibly valuable spectrum asset for future connectivity, the slated 2020 auctions could be an opportunity for the Canadian Government to encourage more competition in the country.

For Bell in particular, this is not welcome news. The current market leader decided to sit out the already expensive 600 MHz auction in April, turning attention to next years’ 3.5 GHz sale instead. If the Canadian Government starts placing difficult obligations or limits on purchases, this might prove to be a red-tape maze of nightmares.

Although the pursuit of increased competition to aid consumers is a valiant cause for authorities to champion, the current chaos in India should serve as a warning for the Canadians. India was a market which was perhaps in need of a disruption (like Canada) due to high data prices and the risk of a digital divide emerging (like Canada), though authorities did not strike the correct balance.

With arguably too much assistance offered to Reliance Jio, the market risks heading towards an environment with even less competition. Telenor has already given up on India, Vodafone and Idea merged, with the new company now financially strained, state-owned telcos are being propped up with bailouts and Bharti Airtel looks uncomfortable. This is a perfect example of what happens when regulations to encourage the growth of challengers are implemented in an ineffective manner.

No concrete plans have been made yet, but this is an area certainly worth keeping an eye on. New rules and regulations are likely to be slated over the coming months, though it will be very difficult to strike the right balance and avoid another debacle like we have been watching in India.

AT&T takes another step towards the global IOT dream

AT&T has signed a partnership agreement with Canadian telco Rogers, to extend LTE-M coverage for IoT customers of both companies, throughout Canada and the US.

Rogers IoT customers will now have the ability to roam on the AT&T LTE-M network, with the same privilege being offered the other direction. With AT&T relying heavily on IOT to drive new engagement with enterprise customers, this is another example of the US telco spreading its wings across the globe.

“More and more of our enterprise customers are launching IoT applications across international boundaries,” said Chris Penrose, President of Advanced Mobility and Enterprise Solutions at AT&T.

“Having access to the Rogers LTE-M network across Canada will help them simplify deployments and scale their North American IoT plans.”

The emerging IOT world is one which offers a huge amount of promise for the ambitious AT&T team. In a briefing at Mobile World Congress this year, AT&T told us the opportunity was not only from connectivity, but to move up the value-chain and create platforms and customisable software solutions for enterprise.

There are of course multiple elements to ensure this dream can be realised, however a network which reaches beyond the borders of the US is critical. The IOT business can survive in a single country, but if you want to work with the big boys you have to be able to offer a network which meets the demands of an international business.

With the Rogers partnership, the trio in Canada has been completed. AT&T has a network in Mexico and also a significant partnership in Europe. The European collaboration offers AT&T access to KPN’s LTE-M network in the Netherlands, Swisscom’s in Switzerland and Orange’s in France and Romania. The European operators also gain exposure on AT&T’s networks in the US and Mexico.

With these partnerships in place in Europe, AT&T can expect to cover a significant proportion of the continent, though there are still some significant holes. Orange plans to fill in some of the blank spots with LTE-M launches in Belgium, Slovakia, Spain and Poland, though there is still some work to do.

This is the challenge which AT&T faces in the IOT world. It might be one of the largest and most profitable telcos worldwide, but it is largely limited to the US. If you look at other operators, Orange or Vodafone for example, the physical presence around the world is much more notable. This will factor into the thinking of a few multi-national customers.

‘Five Eyes’ align security objectives but where does this leave Huawei?

After a meeting in London, the members of the ‘Five Eyes’ intelligence alliance has released a communique to reinforce the relationship and outline quite generic objectives.

As with all of these communiques, the language sounds very impressive, but in reality, nothing material is being said. In this document, the UK, US, New Zealand, Australia and Canada have committed to countering online child sexual exploitation and abuse, tackling cybersecurity threats and building trust in emerging technologies.

Although nothing revolutionary has been said, the reinforcement of this alliance leaves questions over Huawei’s role in the aforementioned countries.

“There is agreement between the Five Countries of the need to ensure supply chains are trusted and reliable to protect our networks from unauthorised access or interference,” the communique reads. “We recognise the need for a rigorous risk-based evaluation of a range of factors which may include, but not be limited to, control by foreign governments.”

Government officials will never be so obvious as to point the finger at another nation, at least not most of the time, but it isn’t difficult to imagine who this statement is directed towards.

So where does this leave Huawei? Banned in Australia and the US, denied work in New Zealand and on thin ice in Canada. The only market from the ‘Five Eyes’ where is does not look doomed is the UK. But can the other members of the intelligence club trust the UK while Huawei is maintaining a presence in the country’s communications infrastructure?

The US has already spoken of withholding intelligence data should the partner nation allow Huawei to contribute to 5G networks, and this alliance is already very anti-Huawei. In re-affirming its position to the alliance, the UK is certainly sending mixed messages only a week after a statement which suggested Huawei might be safe.

Of course, this might mean very little in the long-run, but it is another factor which should be considered when trying to figure out what Huawei’s fate will actually be.

For its own part, Huawei is doing as much as possible to disprove collusion and security allegations. Aside from the cybersecurity centres opened to allow customers and governments to validate security credentials, it has recently signed up to the Paris Call.

“The quest for better security serves as the foundation of our existence,” said John Suffolk, Global Cyber Security & Privacy Officer at Huawei. “We fully support any endeavour, idea or suggestion that can enhance the resilience and security of products and services for Governments, customers and their customers.”

The Paris Call is an initiative launched by the French Government in November 2018. It is a call-to-action to tackle cybersecurity challenges, strengthen collective defences against cybercrime, and promote cooperation among stakeholders across national borders. To date, 67 national governments, 139 international and civil society organizations, and 358 private-sector companies have signed up to the collaborative initiative.

Although we are surprised it has taken Huawei so long to sign up to the initiative, it is another incremental step in the pursuit to demonstrate its security credentials and build trust in the brand.

Even with this commitment from Huawei, you have to question how the UK can continue to be a member of the ‘Five Eyes’ alliance and work with the Chinese infrastructure vendor. The concept of the alliance is to align activities and this communique talks about managing risk individually but also about supporting the efforts of other partners.

It does appear the UK is attempting to have its cake and eat it too. We suspect there will be pressure on the newly-appointed Prime Minister Boris Johnson to fall into line before too long, and it will be interesting to see how the newly formed Cabinet manage expectations externally with international partners and internally with British telcos who rely on Huawei.

Huawei trolls the US by talking up Canadian 5G ambitions

Huawei has issued a press release talking up its great relationship with US neighbor and close ally Canada, especially when it comes to 5G.

The announcement was headlined: ‘Huawei doubles-down on Canadian investment and partnership with three major commitments’. The first is more of a commercial objective as Huawei said it will be launching a 5G smartphone in Canada before the end of the year. It also has the distinct added benefit of justifying statements like ‘Huawei brings 5G to Canada’, which is sure to antagonize the US.

The other two commitments were some kind of partner training programme that will train 1,000 Canadians in ICT and a donation of $100,000 towards Ottowa flood relief. The Ottowa river is inclined to burst its banks periodically and Huawei employs quite a few people there, so it’s also letting them take paid time off to help out when this happens.

“We are incredibly proud and humbled by the work we have accomplished in Canada over the last 10 years,” said Eric Li, President of Huawei Canada. “With a team of over 1,100 employees from coast to coast – 600 of whom are engineers – we have the best and the brightest Canadian minds and we will continue to invest in training for the Canadian marketplace. Canada is the home of Huawei 5G and we are working to ensure we remain at the forefront of 5G technology and development.”

That last sentence reads like blatant trolling to us. The US had repeatedly made it clear to its allies that thoroughly disapproves of any Huawei 5G presence in any of their networks so it would presumably feel highly triggered by this sort of thing. Huawei also issued statements by other execs talking about Canada, 5G and security as it’s divide-and-conquer counter-strategy shows no signs of relenting.

Huawei trolls the US by talking up Canadian 5G ambitions

Huawei has issued a press release talking up its great relationship with US neighbor and close ally Canada, especially when it comes to 5G.

The announcement was headlined: ‘Huawei doubles-down on Canadian investment and partnership with three major commitments’. The first is more of a commercial objective as Huawei said it will be launching a 5G smartphone in Canada before the end of the year. It also has the distinct added benefit of justifying statements like ‘Huawei brings 5G to Canada’, which is sure to antagonize the US.

The other two commitments were some kind of partner training programme that will train 1,000 Canadians in ICT and a donation of $100,000 towards Ottowa flood relief. The Ottowa river is inclined to burst its banks periodically and Huawei employs quite a few people there, so it’s also letting them take paid time off to help out when this happens.

“We are incredibly proud and humbled by the work we have accomplished in Canada over the last 10 years,” said Eric Li, President of Huawei Canada. “With a team of over 1,100 employees from coast to coast – 600 of whom are engineers – we have the best and the brightest Canadian minds and we will continue to invest in training for the Canadian marketplace. Canada is the home of Huawei 5G and we are working to ensure we remain at the forefront of 5G technology and development.”

That last sentence reads like blatant trolling to us. The US had repeatedly made it clear to its allies that thoroughly disapproves of any Huawei 5G presence in any of their networks so it would presumably feel highly triggered by this sort of thing. Huawei also issued statements by other execs talking about Canada, 5G and security as it’s divide-and-conquer counter-strategy shows no signs of relenting.