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CRTC: THE CASE FOR PUBLIC INVESTMENT IN LONG LIFE CYCLE BROADBAND INFRASTRUCTURE THROUGH PUBLIC POLICY

by Rob McPhee on June 23, 2015

This opinion is provided by Rob McPhee of McPhee and Associates for the CRTC to consider as it initiates a review of basic telecommunications services for all Canadians.

More information on the CRTC review can be found here: http://news.gc.ca/web/article-en.do?nid=960029

Rob has led technology and technology infrastructure development for communities, governments, not-for-profit corporations and the private sector for over 20 years.

The CRTC is asking 4 basic questions, and my responses are included below.

QUESTION 1:

WHAT SERVICES ARE REQUIRED TO PARTICIPATE IN THE DIGITAL ECONOMY?

RESPONSE 1:

To participate in the digital economy,  the first question that needs to be asked is “who needs service?”.

There are different stakeholder groups and each needs different things. These stakeholder groups include:

  • Governments at all levels (Political)
  • Governments at all levels (Operational)
  • Businesses including SME’s, Nationals, and Multinationals
  • Residents

The second question now being “What type of service?”.

Successful participation in the digital economy is dependent on 3 broad factors:

  • Capital
  • Infrastructure
  • Skills and Knowledge

These 3 factors are required for the digital economy, and having 2 out of 3 of these factors addressed doesn’t present a partial measure of success.  All three need to be adequately addressed for a successful ecosystem.

Muskoka, and indeed Canada, will need to determine where we want to position ourselves in the global competitive landscape as it relates to the digital economy.  A credible set of data that depicts Canada’s global position regarding telecommunications infrastructure is available from the OECD at http://www.oecd.org/sti/broadband/oecdbroadbandportal.htm

As Canadians, do we want to trail, be in the middle, or be leaders in the digital economy? Personally, I want Canada to be in a leadership position.

From my observations, governments (operational), national and multi-national businesses have a successful mix of the 3 essential factors which are putting them in the leadership space in the digital economy. Their needs are being addressed and they have been able to occupy leadership in this space.

However, according to Industry Canada, as referenced by the Canadian Chamber of Commerce, there are also over 1 Million small businesses in Canada. (Source: http://bit.ly/1e5XDaL )

A nominal portion of small businesses are pro-active in their information and communication technology (ICT) investment. In most cases though, small businesses is somewhat unaware of the benefits, and in cases where benefits are apparent, small businesses lack the capital or expertise to execute and implement.

In most cases, the skills and knowledge gap is a bigger problem than the capital problem.

For small business to engage and benefit in the digital economy, capital, infrastructure, skills and knowledge will have to be addressed in unison and in earnest.

The last stakeholder group,  governments (political ) at all levels, have a brewing problem.  The private sector technology providers can and should only provide service where it is in the best interest of shareholders.

Governments’ role is to be involved only where the public interest is served and where the private sector providers cannot meet the needs.  It is abundantly clear and there is significant intelligence available to all levels of government, that leading broadband infrastructure is an urban delight and is more ubiquitous in large centres and where population densities are higher.

So for most residents and small businesses that are located in a rural or small population centre, the best existing broadband choices are often mobile wireless (aka cellular).  This may be a reasonable choice for personal broadband connectivity, but is a poor or very expense broadband choice for a family, or a small business.

Residents and small businesses do not have the ability to singularly change this landscape, so the onus should be on governments (political) at all levels to be determined and co-ordinated to address this issue for the benefit of Canadians.

As noted above, we need infrastructure, capital, and skills and knowledge.   Leading edge broadband infrastructure is the essential component above all other components in the digital economy.

QUESTION 2:

UPLOAD AND DOWNLOAD SPEED IN THE DIGITAL AGE?

RESPONSE 2:

There is no specific number that can be quantified for several reasons.

Firstly, what may be appropriate for one party may be totally inappropriate for another party.  For example, a family may operate well on a 10Mbps X 5Mbps service today, but a small business video production company who produces and transfers high definition video couldn’t even begin to operate with that level of service.  One size doesn’t fit all in the digital economy.

Since Internet infrastructures is a shared infrastructure, Broadband must be built for the highest common denominator, rather than for the lowest.

Secondly, adequate bandwidth isn’t a complete broadband solution.  In most cases providers business models aren’t built around bandwidth, they are built around data usage.  Bandwidth is a technical component; data transfer caps and usage is a financial implication.  Data transfer caps are the bane of small businesses and residents and the economic backbone of internet service providers.

So price points for various levels of performance and data transfer caps must be considered when setting policy.

QUESTION 3:

THE POSSIBLE NEED FOR FUNDING MECHANISMS TO SUPPORT THE PROVISION OF MODERN TELECOMMUNICATIONS SERVICES.

RESPONSE 3:

We must consider the life cycle of broadband investment.  There is investment by private sector ISP’s in technologies  that produce short and near term revenues and returns.  Private sector has to operate this way, but this doesn’t always serve the best interest of the public.

Canada needs to think strategically about where the country needs to be 10, 20, 30, and 50 years from now.  As a county, we need robust reliable high capacity infrastructure development. Currently, and in the foreseeable future the only technology that can deliver that performance is fibre optics.  Fibre has the capacity, reliability, and scalability to serve us well with a forward looking vision.

Broadband infrastructure development requires planning, consultations, engineering, marketing, and the list goes on.  This means that the delivering a chosen technology is not the complete cost.  Regardless of the technology these other costs exist.

So from a public policy perspective, my recommendation is to develop policy where public investment is tuned to provide incentives and capital for long term life cycle, high capacity, high reliability broadband infrastructure delivered by the private sector.  This can be done through public capital contribution programs for broadband infrastructure as well as tax credit and incentives for companies that can accomplish this.  On the commercial and residential  consumer side, voucher systems can be used to increase the build capital available for under served areas.

While not trivial, it costs nominally more to build 10 Gigabit broadband Infrastructure than it does to build 100Mbps infrastructure. However, the result is a 100 fold improvement in performance, but not a 100 fold increase in required investment.

Note to public policy makers:  Make the investment in longer life cycle, high capacity, and high reliability broadband infrastructure.

The future will come regardless, and as Canadians, we will either have planned and executed well, or we will be reflecting on our diminishing broadband infrastructure position as the globe races past us.

Politicians and public policy makers would do well to quickly come to terms that increasing public investment is affordable and will benefit our economy.  The amounts being publicly invested right now are minuscule compared to the revenue generated.  Also, public investment is pale compared to private sector investment.

QUESTION 4:

THE ROLES OF THE ECONOMIC AND REGULATORY PLAYERS IN TELECOMMUNICATIONS SERVICES, SUCH AS THE PRIVATE SECTOR, GOVERNMENTS, AND THE CRTC.

RESPONSE 4:

Private sector providers are accountable to their shareholders.  Of course they need to operate legally and ethically, however, private sector providers should have no obligation to provide service to Canadians other than what market forces guide.

Governments should not legislate telecom service delivery any more than it should legislate portion sizes of meals in restaurants.  These relationships should exist between providers and their corporate and residential consumers.

Governments role should be to affect policy to maximize a competitive landscape.  Currently, the prominent oligopoly in Canadian telecom allows a few large commercial companies to have a significant stranglehold on the market. In fact the 5 player oligopoly sees 85% of Canadian market share.

Source: http://www.crtc.gc.ca/eng/publications/reports/policymonitoring/2014/cmr5.htm

Governments have tried to improve competitiveness but apparently with very limited success, while a few new entrants slowly attempt to build market share.

“The federal government said Friday that Wind Mobile Corp., Videotron Ltd. and Eastlink Wireless all won significant blocks of AWS-3 (advanced wireless services) spectrum covering most of the country for a combined total of less than $100-million, while Telus Corp. and BCE Inc. together will spend about $2-billion for the licences they won.”

Source: http://www.theglobeandmail.com/report-on-business/spectrum-auction-results/article23327602/

The quote and article above demonstrate this issue with clarity.  In this instance the oligopoly gains access to spectrum at a rate of 20:1 compared to other entrants.

Multiple spectrum auctions in recent years has provided billions (Yes that’s Billions) in revenue for the Federal Government.  This revenue is easily somewhere between 5 and 10 billion dollars. The Canadian Government’s corresponding expenses on this would be limited to Industry Canada’s administration of this.  This is only the money raised on the spectrum auctions and doesn’t account for the taxes that are contributed to federal coffers by the telecom industry players.

However, if you look at what the Canadian Government has invested into broadband infrastructure, the number is in the range of a few hundred million dollars.  Without doing deep-dive, quantitative research, I would place estimates are around 500 million in recent years.

These numbers might be disputed, but will have to stand until someone can produce some better ones.

While spotlighting the Canadian Government for their anaemic investment, it should be simultaneously recognized that the Feds has consistently taken a stronger leadership role than the Provincial, Territorial, or Municipal governments in investment in broadband infrastrucutre. This is probably since the Canadian Government has the largest telecom revenue stream to reinvest, compared to any other government. But again, still anaemic investment.

CONCLUSION

As noted earlier, politicians and public policy makers would do well to quickly come to terms that increasing public investment is affordable and will benefit our economy and country.  The amounts being publicly invested right now are minuscule compared to the revenue generated.  Also, public investment is infinitesimal compared to private sector investment.

Let the private sector serve Canadians where it can under the free market forces of Keynsian supply and demand.  Where the private sector fails to meet the needs of Canadians, create public incentives to provide development. This lagging is currently in the consumer residential and small business segments.  Target those investments to bring service levels to the leading edge instead of “basic service”.

Do it now, and do it with earnest. Make that investment for the benefit of all Canadians.

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Rob McPheeCRTC: THE CASE FOR PUBLIC INVESTMENT IN LONG LIFE CYCLE BROADBAND INFRASTRUCTURE THROUGH PUBLIC POLICY

Cloud Computing and Risk

by Rob McPhee on April 15, 2015

You have probably been hearing lots about cloud computing for sometime now.

The concept of cloud computing is really pretty simple. You use programs and store information on someone else’s computer. Of course there are many more levels of detail and cloud computing comes in a very wide range of scale and diversity.

Software, hardware, and networks have been fairly mainstream for about 30 years now. In pre-cloud days most software, hardware, and networks were owned by a business or organizations as part of their internal infrastructure. IT systems showed up mostly on the balance sheet as assets and subsequently depreciated under appropriate CCA schedules.

As we know, the Internet has changed a few things. Well maybe a lot of things. OK, well maybe everything.

The technical concept of software, hardware and networks really hasn’t changed. What has changed dramatically is economies of scale for the cloud computing suppliers, and business risk for cloud computer consumers.

The smaller the business or organization is, the less software it will likely own in the future. Since a significant portion of software processing will be done in the cloud, a business or organization will have less need for that associated high powered hardware to be processing software and data on internal infrastructure.

Conversley, the cloud computing industry will need more and more processing and storage as this trend continues.

So, what does this mean for business risk? Cloud computing is somewhat like derivative investments in that you are dealing with only the retail front. What isn’t readily apparent is all the underlying systems and business relationships that make that retail front work.

The cloud computing vendor may own their own infrastructure, but more and more cloud computing software providers are using third party hosting companies and not running production systems on their own hardware. Why would they? Hosting companies thrive on economies of scale, and good hosting companies offer reliable, economical, and well supported environments.

Most cloud software providers are reliant on these hosting companies. Personally, I’m not too worried that Google or Amazon Web Services is going to go off the grid tomorrow.

However, there is a pluther of companies that offer Software-as-a-Service (Saas) and they range from the good, the bad, to the ugly. Saas providers are really providing software and hardware to you. My recommendation is that you really need to understand your business risk when signing up with a Saas provider for a cloud computing service.

Knowing what company provides hosting infrastructure for your Saas company is important to know. (Hopefully you are starting to see the derivatives analogy that I mentioned earlier).

In a recent consultation I did with a client regarding ERP, cloud computing vs. non-cloud software was a significant issue in determining the end solution. If we went with a cloud Saas, we could deploy quickly and the client didn’t need any additional application software, middleware, or hardware. However, the market solutions didn’t integrate well with the client’s legacy financial information system (FIS). Getting information from the cloud based ERP system to the non-cloud based FIS would require daily batches. While not an insurmountable obstacle to deal with daily batching, who wants to do that if there are other solutions.

In addition to integration, the was a bigger question regarding business risk. If my client invested in a cloud based ERP system, there were significant risks well beyond the ongoing subscription fee investment. Many of the cloud based ERP solutions reviewed had very good software features. What was not apparent to me was the risk of dealing with the companies that provided the Saas. Dealing with the Saas ERP salespeople typically didn’t bring any more clarity regarding the risk question either.

When evaluating solutions, we really had no idea if the Saas ERP provider would be in business a week from now, a month from now, or a year from now. We had no indication to think they wouldn’t, we simply didn’t know.

If the Saas ERP company went out of business or suffered a significant business interruption, my client would be disconnected from their software, and more importantly all their important data that they use on a daily basis to operate would also be unavailable.

In the end, we settled on and implemented a more traditional software, middleware, hardware solution. This integrates well with their FIS, and even if the chosen non-cloud ERP software provider has a significant business interruption, my client can keep operating, at least in the near-term. Of course we additionally had to deal with a business continuity and data recovery plan for their internal infrastructure. The short story is, with this solution, it’s not an all-eggs-in-one basket approach. There are a variety of local market vendors who can supply, fix and maintain the infrastructure. So my client has more options at their disposal.

Currently most Saas provider are selling on “software features” and “no infrastructre needed” plays.

In the future, I think Saas providers will need to make better disclosures regarding their ongoing viability to convince clients they will be there for the longer term.

Saas providers who fail at the business level will bring a world of misery to their clients if they are suddenly disconnected.

With Cloud Computing you aren’t buying software, you are buying trust.

For me, to turn the tide and use mission critical Saas applications in the cloud, I will have to know that the company I am dealing with is very well managed and is a sustainable and going concern.

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Rob McPheeCloud Computing and Risk

Turnkey IT – Is it right for you?

by Rob McPhee on March 24, 2015

There are typically two types of client needs we deal with at Ebizology.ca.

The first is TURNKEY (That’s turn-key not turkey), and the second is AUGMENTED IT

TURNKEY clients are finding that IT needs have grown to include desktops, servers, internet, websites, databases, security, social media, mobility, remote access, data, legal compliance, etc. Many small and medium sized businesses don’t have the resources to deal with all these wide ranging things.

Businesses in this position really have 3 choices.
1. Hire IT staff.
2. Manage multiple vendors
3. Outsource the management

Each choice has some pros and cons.

If you are hiring and your firm isn’t IT saavy, you will need someone to help you with the recruitment process. This is to ensure you get a candidate with the right skill set. Also, internal IT staff typically have a specialized skill set such as networking, or web development so you won’t solve all your problems by hiring one person.

The approach of managing multiple vendors brings advantages and also issues for businesses. Different vendors can bring solutions that don’t integrate well with other vendor solutions. This sometimes leads to finger pointing and your business doesn’t get the problems resolved.

Outsourcing the management of your IT can give you access to wider skill sets on an a-la-carte basis. You pay only for the type of service that you need, when you need it.

If you would like to know more about TURNKEY IT then CONTACT US today!

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Rob McPheeTurnkey IT – Is it right for you?

Augmented IT – Is it right for you?

by Rob McPhee on March 24, 2015

There are typically two types of client needs we deal with at Ebizology.ca.

The first is TURNKEY IT (That’s TURN-KEY, NOT TURKEY), and the second is AUGMENTED IT

Clients that need augmented IT typically need either different skill sets or additional people for a short-term or transitional project.

By bringing in people to augment your IT function, you can increase your skill, capacity, or in some cases both! The benefit is that as an employer you have no long term obligation for the overhead that comes with that additional personnel.

If you would like to know more about AUGMENTED IT then CONTACT US today!

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Rob McPheeAugmented IT – Is it right for you?

IT Security Needs To Be Part of Your Organizational Culture

by Rob McPhee on March 16, 2015

IT SECURITY is an area of neglect I often see when assessing a new client’s IT environment.  As the discussion with new clients unfold, I typically find out that they had no sense of their IT SECURITY status. Additionally, IT SECURITY is often thought of as a low priority issue.

Based on discussions I’ve had with clients, here are some of the key reasons why organizations haven’t address IT SECURITY.

  • They didn’t even know it was required.
  • They know it is an issue, but don’t understand how address it.
  • Implementing appropriate security has a cost to the company or adds organizational overhead.

To get you thinking about IT SECURITY, here are some key questions you can ask yourself.

  • Do we discuss IT SECURITY within our organization?
  • What IT SECURITY is in place at my organization?
  • If hackers can break into Home Depot, Target, and the Canada Revenue Agency, what is stopping them from hack my organization?
  • What is the risk to my organization if my systems are compromised?
  • Do I have information on my systems that bad guys might find valuable?
  • If my systems were compromised what would that mean to my organization and my customers or clients.

There is nothing to you can do to eliminate “all”  risk with IT systems, however, there are certainly key areas  to be address so you aren’t an easy target.

Just like the events that lead to airline crashes, it’s usually not one thing that causes a significant problem, but a lot of little things that can add up to a significant problem.

Best practices in IT SECURITY requires several layers of defence be in place. So unless you have addressed these issues, it’s probably time to give your IT SECURITY some additional consideration.

It’s little use closing the barn door once the horse has gone, so make IT SECURITY a discussion topic in your organization today.


 

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Rob McPheeIT Security Needs To Be Part of Your Organizational Culture

Viral Marketing

by Rob on March 16, 2014

Social Media has made viral marketing a new possibility, although it is not easy to achieve. Plus you want the good messaging to go viral, not the bad!

When people see content that is very appealing, useful, or just downright entertaining they like to share it with their friends.

This video demonstrates the social behaviour that makes viral marketing happen.

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RobViral Marketing

Social Media Revolution

by Rob on December 15, 2013

Video engages users. If pictures are worth a thousand words then video is worth a million!

Video incorporates sound, imagery, and motion in a way that text and still photos simply cannot. Now take that video and add in the power of social media!

This video highlights some of the recent trends in Social Media and Digital Media consumption around the world.

Video from sources such as YouTube can also help your website SEO.

If you would like to learn how to put video into your website with little effort then please contact us.

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RobSocial Media Revolution