INDUSTRY MINISTER CHRISTIAN PARADIS’ head is spinning. After a couple of days on the ground at the Mobile World Congress in Barcelona, Spain, the Minister had talked to so many people and seen so much interesting new technology, he pronounced himself overwhelmed, impressed and excited by it all, in an interview with Cartt.ca on Tuesday.
MWC is one of the largest wireless industry conferences in the world with about 70,000 attendees – and it is known as the get-together where you’ll find the highest number of CEOs and other senior wireless executives. Thousands of vendors, app developers, handset makers and other suppliers descend on the gathering to try to impress the many carriers in attendance and hopefully do business.
Minister Paradis told us in a phone interview he talked to about 50 people just in the first two hours he was there. “I was just amazed by what I saw… overwhelmed by the new technology here,” he said, adding he liked what he saw from Kitchener-Waterloo’s Sandvine and its intelligent network optimization techniques, for example. “These kinds of things I never would have imagined existed and this is a company from our own country,” he added.
While it’s good to see the Minister learning more about the global wireless industry and excited about the opportunities he sees there, back home, 2013 looks to be a very big year for Christian Paradis and the ministry he heads.
As you’ll read below from our short interview, he says we will have a digital economy strategy released some time this year. Of course, as Cartt.ca readers will remember, the Minister made a commitment to release this important policy document in 2012, but that self-imposed deadline was missed. Paradis said this is too important of a document to rush and he wants to make sure the federal government gets it right. He would not commit to an exact date on the policy release, only noting it will be after the federal budget.
The second big item on the agenda for the Minister and the ministry this year is the 700 MHz wireless spectrum auction. While some analysts had hoped the auction would come in the first half of 2013, Minister Paradis says it will happen before the end of this year, but not in the first half. He says he has no overall revenue target in mind for the auction and that the final auction preparation documents will be released soon, too.
That auction may reveal just who among the smaller wireless players are in this for a longer haul. Despite the federal government’s efforts to help create competition in the wireless business, the newcomers to the scene who emerged after the advanced wireless spectrum auction in 2008 have mostly struggled to attract customers (Wind, Mobilicity, Public Mobile), delayed their launch (EastLink), or decided to forget building a traditional wireless net altogether (Shaw). It’s a topic we here at Cartt.ca have explored in depth.
So, can the government do anything else to spur wireless competition? What does the Minister think of the Rogers-Shaw spectrum option deal? Will we soon see a program to help deliver broadband to the homes of the poor in Canada? Will it be part of a sorely needed digital economy policy for our country?
What follows is an edited transcript of the 15 minute chat between Cartt.ca editor and publisher Greg O’Brien and Minister Paradis.
Greg O’Brien: I wanted to ask you first about the digital economy strategy. Is that still coming?
Christian Paradis: It’s still coming. I wish it had come last year but frankly it would have been irresponsible. I held a lot of consultations and there is some work still to be done. In the meantime, we took a huge step in terms of some policies but some work needs to be done to make sure we mobilize the involved stakeholders in this. So it’s still coming, it’s still a work in progress.
We have had good exchanges with people, from academics, industry – they all know we are fully committed to this… and I explained this is a one shot deal where we need to do it properly.
GOB: Do you know when it might come out or can you outline any overall thrust or theme that the policy might focus upon?
CP: I’m confident it will be sooner rather than later. Of course now we are in the budget process so there are some other aspects that I need to take into account, but I think when the budget is passed, a lot of things will be clarified and then after that I am confident we will be able to move on, in due course.
GOB: And the budget is next month, right?
CP: I presume, but the Finance Minster will tell you better than me, I’m not in on that secret.
GOB: Let’s move onto the 700 MHz spectrum auction. When will that happen and what do you hope is going to come out of it?
CP: First of all, you know all of the policies that we have announced – enhanced competition and enhanced investment – making sure that we have access to the best technologies in our country. After that, we held consultations for the format of the auction and also for the policies for tower sharing and roaming we announced to achieve the goal of competition – but with a better approach for consumers too.
There will be an announcement soon about the format and after that the auction will be held by the end of 2013 as we committed to, and the 2.5 GHz auction will happen the year following this.
GOB: Will the (700) auction be held in the first half of the year or later?
CP: With the 700 MHZ, what we want to do is go by the end of the year. Since we had to go with the consultations on the format – and there is still some work to be done – I would tell people I don’t think it will be rushed but the commitment is there to do it by the end of 2013 and then after that we have committed to come with the 2.5 GHz (in 2014).
But, we can presume the (2.5 GHz) process will go faster since the auction format will probably be the same, so we won’t have to reinvent the wheel. I do appreciate the fact that the market is seeking predictability and when we speak about spectrum availability, since this is a big factor in terms of investment and what’s coming next in terms of road maps. So there are a lot of questions we are working on to make sure that we hopefully can provide predictability and certainty to create a good climate of investment and then hopefully increase and enhance competition.
GOB: Have you set any revenue target for this auction?
CP: No. There’s no revenue target for this auction. Of course, there are floor prices, but there’s no revenue target. We want to make sure our policies are achieved and this is why we went with caps. Some people would say “why not a set aside”? Well, we decided to have this approach… This is not a guarantee that we will have competition. I have always been clear from the outset that we can not guarantee that but at least we can put the best positive conditions that we think (will help).
So, we decided to intervene in a less intrusive way in the sense that if you put a set aside with a scarce spectrum block like 700 MHz, then you decide who will take which ecosystem and it will not have been responsible. We could not do it the same way as we did the AWS (there is less spectrum in this block than the AWS auction, which featured a set aside for new entrants). Going with caps, you let the market decide who will go where in terms of ecosystem and I think this was the best thing to do. (Click here for an ecosystem explanation.)
GOB: Speaking of the government’s policies, the wireless market has not grown in the way that many had hoped. Is there anything the federal government will do to boost these new wireless companies who are struggling much more than most thought they would be?
CP: Of course, this is always a work in progress and this is why when we asked the question to the industry in general, the fact that we relaxed the (foreign investment) rules, I think, resonates. It doesn’t mean people will rush to the doors by tomorrow but people said they see it with a positive feeling. This is what I have heard right here in Barcelona.
But also, when I get asked the question what the federal government can do, what I understand is capitalization is the life and death of this sector. The idea is to invest and then after that reach the break even point and then after that more revenue and hopefully profits. And to get there, what people said is to “provide us with a good environment to make sure that investors are willing to invest here” and it goes to predictability and a good legal framework.
Not only investing in the operators but across the board for equipment producers and others. I said here in Barcelona that in Canada we paid down our debt, we harmonized the rules, we cut the red tape and all of the policies we have put in place since 2006 – and we are continuing to go this way. Now spectrum is an opportunity and of course after we’re done with 700 and the 2.5 GHz auction, I understand there are expectations for a road map of what is coming next in terms of spectrum availability and the plans from the federal government on that. I’m fully aware of that and we are working on this.
GOB: Does it worry you that a company the size of Shaw Communications decided not to get into the wireless business and instead sell an option to Rogers to transfer its AWS spectrum to them? And will the government get involved in that sale at all?
CP: First of all, this was not the intent of the policy back in 2008 and of course, you know I have to pre-approve this transaction which will occur officially in 2014. I will fully scrutinize this transaction. This is our role. I can not pre-judge at this point, but I can confirm to you this transaction will be fully scrutinized.
GOB: But as far as a company as big as Shaw saying “boy, the wireless business is just too expensive to get into,” from the government’s point of view does it worry you that we’re now just where we’re going to be with wireless competition – with the Big Three and maybe a few regional players skating around in between?
CP: Of course, this is not the goal that we are aiming and that is why we have to scrutinize this particular case, but from what I hear in Barcelona… there are a lot of opportunities and this is why we keep saying there is a way to invest in Canada, there are some good opportunities. Like I said, we can not guarantee (competition) but we will put good and solid policies in place in order to achieve these goals but some things like the case you just mentioned might occur and it is our responsibility at this point to fully scrutinize what is going on.
GOB: Let’s circle back around to the topic I always come back to – getting broadband to the urban poor, not to rural folks (there are many plans for that) but to the urban poor who can’t afford broadband that is all around them. What is the government going to do about that?
CP: First of all, there is the competition aspect and I understand also some work is being done within the industry – and of course, we are paying close attention to it. There is a new CRTC chairman in Jean-Pierre Blais and this is under his watch in terms of regulation. I know that Mr. Blais seems to be aware about the fact that there are some issues in terms of consumer affairs so we will pay attention closely to what is being done there.
GOB: But will such a broadband push be part of the digital economy strategy? Can you look to the Connect2Compete program in the States and encourage something like that to happen here because that program doesn’t even involve any government money, it’s just a government push to get the carriers to act.
CP: Yes, it’s a government push there and here the CRTC has jurisdiction over this. I am well aware of what you are talking about and I can tell you that some avenues are being studied as we speak and now the idea is to understand who can do what and some work is being done in the industry as we speak. This is something very interesting and hopefully when we come out with the strategy there will probably be some more clarification about that, but I don’t want it to seem like a pre-announcement because there is some information that needs to be sorted out as we speak.
But I can tell you that we have now communication between the different players that was not in place a year ago.
