Competition Will Drive Canada's Digital Advantage
Submitted by Cogeco Cable Inc. 2010–07–09 19:13:18 EDT
Theme(s): Building Digital Skills, Canada's Digital Content, Digital Infrastructure, Growing the ICT Industry, Innovation Using Digital Technologies
- Cogeco Cable Inc. (Cogeco Cable) is pleased to file this submission in response to the Government of Canada's consultation paper on a digital economy strategy for Canada entitled: "Improving Canada's Digital Advantage — Strategies for Sustainable Prosperity" (Consultation Paper).
- Cogeco Cable, a cable telecommunications company, owns and operates wireline broadband telecommunications facilities and provides a wide range of Internet, voice, data, video and related services in the Provinces of Ontario and Québec in Canada, as well as in the Republic of Portugal. It is the second largest cable system operator respectively in the Provinces of Ontario and Québec, based on the number of basic cable customers served. Cogeco Cable provides services to both residential and business customers. It is a Canadian business corporation with subordinate voting shares listed on the Toronto Stock Exchange (CCA), and it is ultimately controlled by Mr. Henri Audet and members of his family. Mr. Henri Audet, a Canadian broadcasting and cable industry pioneer, founded the business in 1957.
- As at 31 May 2010, Cogeco Cable served 874,000 basic cable, 550,000 high speed Internet (HSI), 542,000 digital television and 341,000 telephone customers in Canada. In addition to its hybrid fibre coaxial local (HFC) distribution plant in the various communities it serves, Cogeco Cable owns and operates an extensive, state–of–the–art fibre optic broadband network in the Provinces of Ontario and Québec, extending from Windsor to the tip of the Gaspé Peninsula.
- Cogeco Cable was the first Canadian cable telecommunications company to experiment with fiber–to–the–home connexions in 1989, and to launch a commercial broadband Internet access service in the Province of Québec in 1995.
- Cogeco Cable successfully competes with a variety of wireline and wireless broadband telecommunications service providers, including very large integrated telecommunications service providers such as Bell Canada and Telus in Canada and Portugal Telecom and Zon Multimedia in Portugal. Cogeco Cable does not hold a market share in any of the relevant markets and services which would allow it to exercise any market power. All of its business activities are intensely competitive, and the degree of competitive intensity is increasing very fast both in Canada and in Portugal.
- We appreciate the opportunity provided, through the Government's consultation process, to participate in the collective effort towards adopting a comprehensive, forward–looking, effective and sustainable national strategy that will assist in maximizing the benefits of the digital economy for Canada and all its citizens.
- We have kept our submission short and to the point. We have limited our answers to specific questions only with respect to the specific questions asked in the "Building a World Class Infrastructure" section of the Consultation Paper, given the fact that we have more relevant experience, knowledge or expertise in that area. We can only hope that our submission will contribute usefully to the policy discussion.
- Cogeco Cable was a participant in the Forum on the Digital Economy held in June 2009. We wish to commend the Government of Canada for following up quickly on this initiative and tackling the important issue of a digital economy strategy for Canada. The existence and content of a digital development strategy and an e–government strategy are, not surprisingly, among the criteria used by some international benchmarking studies such as the Digital Economy Rankings 2010 of the Economist Intelligence Unit (EIU).
- We also wish to commend the Government of Canada for striving to achieve a clear, consistent and economically–sound view of its role with respect to the development of digital technologies in Canada and Canada's digital economy. As the EIU aptly states for the government policy vision and strategy section of its ranking criteria, "E–ready governments supply their constituents — citizens and organisations — with a clear roadmap for the adoption of technology, and they lead by example in their use technology to create efficiencies".
- The United Nations e–government Survey 2010 ranks Canada third behind the Republic of Korea and the United States of America on its e–government development index, but eighth on its e–participation index. The EIU ranks Canada 11th on its digital economy rankings and scores, two notches down from a year ago. While the selection, measurement and weighting of the criteria used in these and other benchmark ratings will always be the subject of debate, it is fair to say that Canada and Canadians cannot afford to be complacent and must renew their efforts to be at the top of the class.
- The Government of Canada should also be commended for tackling with determination the modernization of its statutory framework in areas that are essential to a prosperous digital economy, specifically anti–spam, privacy and copyright. We can only hope that actual legislation in these areas will be adopted by Parliament and implemented in the near future.
- The Consultation Paper raises in our view most of the relevant issues in designing a national digital strategy. We are disappointed however with the apparent lack of appreciation for the corresponding importance of a green economy and the critical link between digital technologies and the greening of our economy. With its comparatively huge geography, uneven population distribution, high disposable income and highly developed broadband networks, Canada can and should play a leading role in the adoption and pervasive use of distance learning, distance training and telework. There are enormous productivity gains at hand, which would go a long way towards bridging the productivity gap between Canada and the United States of America, as well as huge environmental benefits in such an approach. The Government has a major leadership role to play in this regard, particularly through leadership by example and fiscal policy.
Capacity to Innovate Using Digital Technologies
- Despite the modest size of its population and its economy compared to its neighbour to the south, Canada has provided over the years several remarkable examples of innovation and entrepreneurship from its citizens, leading to the creation of a host of successful upstarts in almost every sector of the economy, and eventually very large wealth–generating enterprises with global reach. Several of the Canadian success stories can be categorized as falling under what is now defined as the information and communications technology (ICT) sector.
- In our view, innovation and entrepreneurship will continue to flourish in Canada if we are collectively prepared to: a) raise the level and improve the leverage of our investment in higher learning, training and research, thus enhancing our domestic talent pool; b) welcome, attract and retain talent from abroad; c) allow capital from abroad to flow in; and d) ensure that new ventures can be effectively hatched and supported in Canada through the early development stage.
- It is somewhat disconcerting that Canadians have been doing relatively well in the development of digital technologies, but not so well in their adoption domestically in the various sectors of the Canadian economy. We believe that there is no silver bullet solution to the e–adoption problem. The various elements of a solution to this problem have however been well analyzed and documented recently. They cut across areas as diverse as education, training, management and technical skills improvement, composition of the labour force, goal–setting for SMBs and fiscal policy.
- The Information Technology Association of Canada (ITAC) has put considerable effort into articulating some of the key drivers that would likely bring significant gains on e–adoption in Canada, with the publication in 2009 of a document entitled "Upping our Game: A National ICT Strategy for Canada". We support that document and its reflection in ITAC's response to the Consultation Paper.
Building a World–Class Digital Infrastructure
- We strongly believe that the Government of Canada's policy of enabling competition and promoting private investment through market forces and streamlined regulation in the telecommunications sector is the right policy approach.
- We must add however that a critical component of this policy is to continue promoting facilities–based competition to the maximum extent feasible. Facilities–based competitors must invest large amounts of capital in lasting competitive broadband infrastructures, which they also need to extend and continually improve due to network economics and technological change. The capital investment in infrastructures has lasting benefits for the economy, and the risk involved stimulates innovation in the use of these infrastructures in order to achieve a return on the capital invested.
- We commend the Government of Canada for the way in which it conducted the AWS auction. The auction not only raised huge returns for the consolidated revenue fund, it also created favourable conditions for more facilities–based competition in the wireless telecommunications segment of the industry. In its report published last month, the Standing Senate Committee on Transport and Communications was forced to admit that, since beginning its work in March 2010, landmark changes had already occurred on the heels of the AWS auction, with service plans being introduced at lower prices, with more flexible contract terms and no system access charges on the one hand, and the rapid deployment of 3G networks now covering over 91% of Canadians.
- On the wireline front, there is tangible evidence as well that the Government of Canada's policy is working. Fibre–to–the–home (FTTH) and IPTV deployments are unfolding at an accelerated pace this year, leading to more competition in all broadband service categories and offerings.
- For its part, Cogeco Cable is currently deploying across its HFC networks a host of new technologies including Docsis 3.0, switched digital video, digital to analog adapters (DTA), HD and 3D video distribution, and heading towards a fully integrated IP platform. These developments in the deployment of digital technologies are driven by the need to ensure the competitiveness of our networks and services as well as a more efficient, fully digital, use of bandwidth on our wireline plant.
- We have just recently announced a further string of High Speed Internet (HSI) access enhancements on speeds and bitcaps offered through our systems in Ontario and Québec, as well as in Portugal, with top download speeds of 50 Mbps and 120 Mbps respectively in Canada and Portugal. The trend towards ever faster, more reliable and affordable high–speed connections is clearly present in our footprint, and we expect this trend to continue in earnest due to competitive market forces and rising consumer expectations.
- Our upgraded two–way digital broadband plant currently extends to over 95% of households passed (HHPs) and we expect that it will reach almost the totality of HHPs within the next five years. What speeds and other service characteristics are needed by users (e.g. consumers, businesses, public sector bodies and communities) and how should Canada set goals for next generation networks?
- Past experience with digital technology shows that it is basically pointless to set arbitrary targets for the desirable characteristics of broadband services, including speed, quality–of–service, pricing or technology used. In the space of only fifteen years, we have moved from 56 Kbps dial–up narrowband connections to broadband connections with speeds of over 100 Mbps without the setting of any governmental targets. We have also experienced an explosion in the range of services available through broadband connections, with HD video content now driving exponential growth in capacity and throughput of broadband networks.
- Within the wireline cable segment alone, we are already well into the era of 100 Mbps wideband cable modems and rapidly moving towards ten times and even 100 times more throughput, and eventually up to 1000 times more throughput at 100 Gpbs.
- If the Government of Canada feels that there is merit in stimulating the collective will to adopt broadband connectivity through the setting of certain national objectives, these objectives should be technology–neutral and limited to general throughput and availability targets or expectations, more or–less in line with targets recently set in the United States of America as part of its broadband strategy for the decade ending in 2020.
- We are quite confident that 75% of Canadian households or more will have access to broadband connections with 100 Mbps throughput or more by 2020, and also that these metrics will be surpassed sooner if competitive market–driven economics are allowed to operate fully in the Canadian telecommunications space. What steps must be taken to meet these goals? Are the current regulatory and legislative frameworks conducive to incenting investment and competition? What are the appropriate roles of stakeholders in the public and private sectors?
- Market forces have the same potential to generate cutting–edge digital technology deployment and use in Canada as they have in other countries around the world. If there was ever a gap in speed and quality of services in Canada as compared to those available in certain other countries in the world, which has been the subject of considerable debate lately, this gap will quickly disappear in the next few years given the current pace of investments in cutting–edge digital technology deployments both in wireline and wireless networks in Canada. The Government of Canada just needs to steady the course on its current competitive policy approach in the telecommunications sector and the positive results will accelerate.
- It is critically important however to ensure that real–dollar investment in Canadian broadband telecommunications infrastructures continues to flow into Canada, and that facilities–based competition within both the wireline and wireless broadband telecommunications segments is allowed to unfold without regulatory hindrance. It would be a serious public policy mistake in our view to focus instead on mandated third–party access to facilities financed and deployed by others. This would only stifle investment in Canadian telecommunications infrastructures and slow the rate of deployment of cutting–edge digital technologies in Canada.
- We believe the key role of the public sector is to lead by example in the efficient and more prevalent use of the competitive Canadian digital infrastructure deployed by the private sector, as opposed to trying to be involved itself in the rollout of telecommunications facilities and new generation networks.
- The Government of Canada should conduct a detailed review of its procurement policies and processes for telecommunications services with a view to benefitting from savings and innovations in each geographic market where it consumes services, as opposed to relying on turnkey Canada–wide solutions traditionally provided by a duopoly of incumbent national telecommunications common carriers. What steps should be taken to ensure there is sufficient radio spectrum available to support advanced infrastructure development?
- It is worth noting the major difference between wireline and wireless broadband networks in terms of spectrum availability. Wireline networks use artificial guides which confine signals within these guides in isolation from the over–the–air electromagnetic spectrum. With the advent of fibre optic networks, transmission is increasingly achieved from end–to–end through light waves, which are not part of the over–the–air spectrum available for any type of wireless applications. Spectrum availability is therefore strictly a wireless network issue.
- Cogeco Cable is not currently a player in the wireless space. We wish to note however that the migration of over–the–air television broadcasting from analog to digital transmission, expected to take place on 31 August 2011, will free up considerable and very suitable spectrum for wireless telecommunications applications. Other parts of the spectrum in higher frequency ranges for broadband wireless telecommunications remain underutilized. Finally, technological change continues to improve the efficiency in the use of spectrum by wireless network operators. The Government of Canada has therefore several options available to allocate — or reallocate — spectrum for wireless applications, promote further competition through spectrum sale to new players, and promote more efficient use of wireless spectrum generally.
- Current wireline fibre technology has the advantage of allowing fully secure, highly reliable and virtually limitless two–way broadband transmission capability. We wish to emphasize that the Government of Canada must allow this advantage to unfold and to generate benefits for all Canadians under competitive market conditions, without regard for the constraints or technical limitations of wireless broadband networks or their use of over–the–air–spectrum. Competitive markets will ensure that both types of networks are developed, deployed and utilized with maximum effectiveness and economic efficiency. How best can we ensure that rural and remote communities are not left behind in terms of access to advanced networks and what are the priority areas for attention in these regions?
- As noted in the recent report of the Standing Senate Committee on Transport and Communications, with the rapid deployment of third generation (3G) wireless networks in Canada, the coverage of wireless 3G networks passed from 78% in 2007 to 91 % as at August 2009. The penetration of broadband access through wireline and wireless networks has increased so rapidly in the past two years that we understand it has had a major impact on the number of applications that were eventually filed and pursued under the government's "Broadband Canada: Connecting Rural Canadians" program announced in the 2008 federal budget (Rural Broadband Program).
- The Rural Broadband Program was very useful in focussing attention on the tools required to monitor developments in terms of broadband access in rural and remote areas. We believe that the Government of Canada should continue to update its mapping and related monitoring tools with a view to assessing the pace and extent to which access in remote areas is improving further.
- We fully support the Government of Canada's policy approach to fund broadband in underserved areas directly through funding initiatives such as the Rural Broadband Program, rather than cross–subsidization through a universal fund approach. As noted in the Consultation Paper, the Canadian Radio–television and Telecommunications Commission (CRTC) launched a proceeding in January 2010 to consider a universal fund approach and related issues. Cogeco Cable is a party to that proceeding. We submit that the federal telecommunications regulator should not embark on a different policy track, which would inevitably lead to a complex ex ante regulatory scheme and interfere with the efficient rollout of digital technologies, including new generation networks.
Growing the Information and Communications Technology Industry
- It is appropriate to refer here again to ITAC's document entitled "Upping our Game: A National ICT Strategy for Canada". In this regard, we also support ITAC's response to the Consultation Paper.
Digital Media: Creating Canada's Digital Content Advantage
- Cogeco Cable has always been a strong supporter of the Canadian broadcasting system and of initiatives designed to support Canadian talent in the broadcasting media. We pay the majority of our programming fees to Canadian specialty, pay and on–demand program content suppliers. We contribute many millions of dollars each year to the support of Canadian expression, this contribution is growing year after year, and it is now extending to new digital platforms.
- Our financial contribution includes direct funding of the Canada Media Fund (CMF) program. We commend the Government of Canada for modernizing and expanding the role of the former Canadian Television Fund into what is now known as the CMF.
- We do believe that Canadian digital content creation will increasingly be dependent on a multi–platform strategy and that digital content must be part of the digital economy strategy. We also believe however that this part of the strategy cannot sustainably rely on detailed regulatory intervention on the distribution of digital content in the global IP world.
- We have opposed — and will continue to oppose — any attempt to tax Internet access services or other digital telecommunications platforms and services in order to cross–subsidize Canadian digital content creation, distribution or marketing, as this would run directly against the goal of rapid deployment, accessibility and affordability of next generation networks and pervasive e–adoption in Canada.
Building Digital Skills for Tomorrow
- As noted in the Consultation Paper, we recognize that training and learning is a complex area of shared federal and provincial/territorial jurisdiction. The Government of Canada does however have considerable influence over the funding of higher education and has jurisdiction over immigration policy. Over and above the existing initiatives mentioned in the Consultation Paper, the Government of Canada should also include higher education funding and streamlined foreign human capital recruitment considerations as part of its digital economy strategy for Canada.