Industry Canada’s Auction Rules Prevent Interference (with Telco Profits)

Not that long ago, if you wanted to spend an evening watching a movie, you’d head down to the local video store, walk around the aisles a couple times, and once you found something ‘good’ you’d head to the till, whip out your membership card, pay and head straight for the couch.

Today, if you’ve got a set-top box like the Boxee or an Apple TV, you can rent movies in glorious HD without ever leaving the house. Actually, with video stores going bust left, right and center, over-the-top services like Netflix are quickly becoming the norm for home entertainment.

Apple’s device connects to the Internet through your Wi-Fi router and lets you watch Netflix or movies you’ve rented from the iTunes store (or a number of other sources) directly on your HDTV. Once you pick a movie, you have to let it load for a few minutes before watching – just enough time to run to the kitchen and throw a bag of popcorn in the microwave.

Next time you spend two minutes listening to kernels pop, think about this: both the Wi-Fi network you’re using to stream your movie and the microwave that’s cooking your popcorn are made possible by public, unlicensed spectrum. In fact, both devices use the exact same “license-exempt” frequency – but they’re designed not to interfere with each other; the microwave won’t slow your download, and the Wi-Fi won’t burn your popcorn. And don’t worry, neither will give you a tan.

Industry Canada is responsible for managing spectrum. It does this by setting rules that allocate certain frequencies to specific uses, so companies that make devices like microwave ovens or tablet computers can select the right components for manufacturing, and so that companies that rely on spectrum to provide services like broadcasting or mobile data can install the right transmission and reception equipment.

Canada itself is a relatively small market. For many manufacturers producing devices that rely on spectrum, it just wouldn’t be worth it to invest in making and distributing goods exclusively for a population of our size. In order to ensure that Canadian consumers have access to the latest and best appliances, devices, tools, and services, Industry Canada has historically harmonized its spectrum policy with that of the United States. That way, when companies like Apple, Nokia, Samsung or Cisco invest in manufacturing devices for our neighbors to the south, we get to use those same devices up here, too.

In 1985, the FCC made a block of spectrum known as ISM available for unlicensed use in the US. This created an opportunity for companies to develop and sell consumer devices like garage door openers, microwaves, cordless phones and Wi-Fi.

Industry Canada followed suit, which it did again in 1996 when the Radiocommunications Act was amended to authorize the Minister of Industry to conduct spectrum auctions, in 2008 when it conducted the Advanced Wireless Services auction, and now with its 700MHz auction. Each time Industry Canada has had an opportunity to learn from American experience and adapt their rules to accord with Canadian circumstances, although our policy has always been strongly influenced by market realities at the same time.[1]

Industry Canada’s plan for dividing up the 700Mhz spectrum that’s going to be auctioned in 2013 is modeled after the American auction that took place in 2008, adjusted to fit the number of companies in the Canadian industry and according to our regional geography. What’s unusual about this auction is that Industry Canada has decided not to emulate the FCC’s decision to designate one block of spectrum for ‘open access’.

The American spectrum that was designated for ‘open access’ was still licensed and sold at auction. The ‘open access’ designation means that whichever company holds the license to this spectrum must not discriminate against any device or application designed to be compatible with that frequency range. In other words, no locked phones, no blocking Skype, etc.

Industry Canada conducted a consultation prior to issuing its 700MHz auction rules, during which the majority of wireless service providers opposed open access rules. Some respondents, including independent media group CACTUS and Drs G. Taylor and Catherine Middleton from Ryerson University, argued in favor of open access. However, IC chose to decide in favor of providers like Sasktel, who argued that “there are sufficient competitive forces in the market place already driving vendors and service providers toward open access for platforms and devices.”[2]

Anyone who’s ever tried to switch phone companies knows that this just isn’t true; most devices are locked to specific providers, only one of which (Rogers/Fido) will currently unlock your phone for you, should you choose to pay a $50 fee.

If Industry Canada had really wanted to seize the opportunity this auction presents to promote competition and benefit the public, it would have reserved the same block of spectrum that’s designated for open access in the States for unlicensed, public use – which is open access by definition –  here in Canada.

This would have significantly reduced barriers to entry for local companies, non-profit organizations, communities, municipalities and cities in Canada wanting to develop and deploy low cost, high quality mobile data networks. Thanks to American demand, Canadian consumers would have had access to a wide range of innovative devices designed to operate on open standards reliably and without interference, just like Wi-Fi and microwaves ovens.

Local service providers wouldn’t have had to worry about investing in expensive infrastructure outside of their primary areas. With a system based on public spectrum and smaller local providers, it’s likely that monthly plans offered by local carriers would become popular for local use, while prepaid plans could be purchased from third parties for trips out of town where other providers’ networks are already established. Companies like Fido and SpeakOut already sell prepaid plans, compatible with open access devices, at places as common as gas stations and grocery stores. Innovative companies might emerge to compete in a market for third party ‘roaming plans’. Consumers could have bought their devices outright, mixing and matching plans to suit their personal needs, based on who’s offering the best service, not which carrier’s contract they’re locked into.

This scenario would have been likely if Industry Canada had learned from the FCC’s spectrum auction rules and taken action for the benefit of the public here in Canada. Instead, what we’ve got is a situation where the so-called ‘high point’ of Conservative Industry Minister Christian Paradis’ 700MHz auction announcement is that foreign companies are going to be able to compete for consumers’ hard-earned money.

In fact, the rules as they’re published look more like an Industry wish-list than an honest attempt by the Government to make things better for consumers and the public in general.

Stay tuned; next post I’ll be examining the input Industry Canada gathered prior to the announcement of its auction rules, and how that input shaped the outcome.

[1] Longford, Graham. “Spectrum Matters: Enclosing and Reclaiming the Spectrum Commons”, in For Sale to the Highest Bidder: Telecom Policy in Canada”, eds. Marita Moll and Leslie Regan Shade, CCPA, 2008. p 96-97.

[2] Industry Canada, SMSE-002-12, “Policy and Technical Framework, Mobile Broadband Services(MBS) – 700 MHz Band, Broadband Radio Service (BRS) – 2500 MHz Band”, March 2012. p 35

One comment

  1. Linda Levy · ·

    Well writteen, Ben, even I could pretty much understand what your are saying.
    Do you mean that the FCC did something right (for once?)

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