March 9, 2010
At a 5000% mark-up, colour may be too expensive for most of us and we will be back to viewing the world in black and white, low resolution and high noise interference.
In Canada, radio airwaves or spectrum, a public resource, is managed by Industry Canada. The Canadian federal government with a $54 billion deficit hopes to gain c. $ 1 billion dollars through its spectrum 10-year licenses auction to cash in on cellphone industry’s astronomical profits (ex. 2006 total revenue $12.7 billion, 2008 total revenues c. 15.9 billion) Was the 2009 spectrum auction a bargain basement for telecommunications giants?
Rogers Communications Inc., Bell Canada Inc. and Telus Corp, Canada’s largest cellphone providers have held spectrum licences for cellphone services in Canada. In 2006 alone Canada’s cellphone industry total revenue was $12.7 billion, 95% of this going to these three companies who- lacking competition- charged higher rates and provided poorer services than services in peer countries. In 2008 the total revenue for Canadian cellphone companies was $15.9 billion and in 2010 cellphone providers Rogers Communications Inc., Bell Canada Inc., Telus Corp, Fido and Virgin charged up to a 5000% mark-up even calculations included technology and overhead costs. Prices were so high and customer service so bad that Marketplace held a “Canada’s Worst Cellphone Bill” contest (Mesley 2010-03-05).
It is no wonder that Rogers Communications Inc. (NYSE: RCI) is listed by Forbes as having Aggressive Growth potential. Should we applaud the growth for Rogers investors or lament the management of the Spectrum commons?
“Spectrum is a catch-all term for the radio airwaves that many wireless gizmos use to communicate information. Radios use spectrum, as do the rabbit-ear antennas on older television sets. The CBC, for example, is broadcast free to many parts of Canada using a part of the electromagnetic spectrum. Cellphones, of course, also use it. Spectrum is divided into different frequencies and measured in units called hertz. The government extracts big revenue from selling spectrum licences to cellphone companies, because those licences are limited while demand is high. Other telecommunications providers would like to offer cellphone services but can’t, because they don’t have a spectrum licence. The auction is expected to earn the government at least $1 billion. A number of smaller regional companies, including Winnipeg-based Manitoba Telecom Services Inc. and Regina-based SaskTel, also have licences and offer cellphone services (Nowak 2008-05-26).
See map of cellphone costs worldwide.
1789 Jeremy Bentham “considered protection from harm, as more basic (and an aim of regulation) than provision of enjoyments: “the care of providing for his enjoyments ought to be left almost entirely to each individual: the principal function of government being to protect him from suffering” (Bentham 1789/1948:301, quoted in Shrader-Frechette 1991:285). An assessor’s prima facie (at first sight) duty is to minimise the chance that an unsafe technology is implemented; in order to minimise public risk. This is a value judgement: is it more important to protect the public from harm (hazards from risky technologies, such as cellular towers), than to provide welfare (benefits from new technologies, such as third generation services and better cellular coverage)? The perception and response type I and type II errors in regulation reveal the rationality of the regulator. The research analyses the national
thresholds pertaining to RF human hazards and spurious emissions (Madjar 2008-08).”
1864 to 1873 James Clerk Maxwell (1831-1894), a Scot theoretical physicist, demonstrated that four relatively simple equations could fully describe electric and magnetic fields and their interaction. He described how charges and currents produce an Electro Magnetic Radio wave (Madjar 2008-08).”
1887, in the research laboratory of a young German physicist, Heinrich Hertz, the first radio transmitter began working briefly over a range of just a few metres (Madjar 2008-08).”
1895-05-07. Alexander Popov (1859-1906) demonstrated his instrument for the detection and recording of electrical oscillations (Madjar 2008-08).”
1895-spring In the spring of the same year, Guglielmo Marconi (1874- 1937) took his wireless experiments outdoors and soon discovered that an intervening hill was no barrier to the reception of electromagnetic waves (Madjar 2008-08).”
1987-1991 New Zealand was the first country to apply the Wireless Act in 1903 (one year before the UK); the first RF Auction in the world occurred there in 1989. Neo-liberal ideologues promoted structural adjustment program which was more drastic than that inaugurated by Margaret Thatcher in Great Britain (Herman and McChesney 1997:178-9). Their 1987-1991 auction of UHF spectrum resulted in the acquisition of RF (Herman and McChesney 1997:180) (Madjar 2008-08:47).”
2002 The economist Vernon L. Smith, the laureate of Nobel Prize 2002, published (Smith 1962) that only under perfect competition, the market price establishes equilibrium between supply and demand- at the level, where the value assigned to a good by a marginal buyer is as high as that of a marginal seller (Madjar 2008-08:47).”
Today there are more than 3 billion cellular telephones worldwide.
2007-11 Even though Canada’s cellphone industry made $12.7 billion in 2006, 95% of the total revenue went to Rogers Communications Inc., Bell Canada Inc. and Telus Corp who charged higher rates and provided poorer services than peer countries because of lack of competition (Nowak 2008-05-26)
2008 In 2008 c. 60 % of Canadians subscribed to a cellphone service, subtantially behind the rest of the industrialized world. Countries such as Denmark and Norway where c. 90% of the population are subscribed and rates are much lower (Nowak 2008-05-26)
Instituting special breaks in the auction was the government’s way of spurring competition (Nowak 2008-05-26)
2008 The total revenue for Canadian cellphone companies was $15.9 billion and in 2010 cellphone providers Rogers Communications Inc., Bell Canada Inc., Telus Corp, Fido and Virgin charged up to a 5000% mark-up even when calculations included technology and overhead costs. Prices were so high and customer service so bad that Marketplace held a “Canada’s Worst Cellphone Bill” contest (Mesley 2010-03-05).
2008-08 Haim Mazar Madjar defended his dissertation entitled “An Analysis of Regulatory Framework for Wireless Communications, Societal Concerns and Risk: the Case of Radio Frequency (RF) Allocation and Licensing” at Middlesex University in which he analysed the role of culture and geography in allocation and licensing of the radio frequency (RF) spectrum in different nations. Using an inter-disciplinary approach for example, he explored contrasting risk-management regulatory frameworks/attitudes in the UK, France, US and Ecuador. He summarized and used 3 alternative sociological theories including Mary Douglas et al.’s Cultural Theory (CT) re: categorising countries in terms of perceptual filters. Bounded Rationality (BR) is used to investigate and explain these apparent irrationalities. Rational Field Theory (RFT) showed how beliefs and values guide administrations in RF regulation. Wireless regulation is now divided into two major camps (the EU and the US), which differ in their risk concerns, approach to topdown mandated standards, allocation of RF spectrum to licence-exempt bands and type approval process.
2010-03-04 The Canadian federal government announced its response to the $54 billion deficit which will take the form of $17.6 billion savings (2010-1015) by streamlining and reducing the operating and administrative costs of government departments.
2010-03-04 The Canadian federal budget has confused opposition politicians and industry observers alike as to whether Canada will open its doors to foreign telecommunications companies. The government promised to increase competition and investment in the telecommunications sector, which will lead to greater innovation and lower prices for consumers by removing foreign ownership restrictions on satellites. However, critic Marc Garneau claimed the budget was an overall disappointment in terms of the digital economy as there is no national digital economy plan and future plans include vague allusions to further studies in terms of fast and affordable broadband internet access for all Canadians. Canada was a leader in the digital economy in 2000. Now we are behind other OCED countries. This federal budget promised more on outdoor recreational infrastructure than on high-speed internet in rural areas (Nowak 2010-03-04).
Webliography and Bibliography
Madjar, Haim Mazar. 2008-08. “An Analysis of Regulatory Framework for Wireless Communications, Societal Concerns and Risk: the Case of Radio Frequency (RF) Allocation and Licensing.” PhD Dissertation. Supervisors: Dr. Peter Hough; David Ball; June Burnham. School of Health and Social Sciences. Middlesex University.
Hazlett, T. W.; Munoz, R. E.; Square, V. “A welfare analysis of spectrum allocation policies.” utfsm.cl
“Economic analysis of spectrum allocation policies focuses on competitive bidding for wireless licenses. Auctions generating high bids, as in Germany and the UK, are identified as “successful,” while those producing lower receipts, as in Switzerland and the … ”
McMillan, J. 1995. “Why auction the spectrum?” Telecommunications Policy. Elsevier. stanford.edu [PDF]
“Of the alternative spectrum allocation methods — administrative process, lottery, first come first served, and auction — economic theory, as well as various countries’ experiences, show that auctioning works best. As well as raising revenue, an auction assigns licenses to the firms … ”
Noam, E. 1998. “Spectrum Auctions: Yesterday’s Heresy, Today’s Orthodoxy, Tomorrow’s” The Journal of Law and Economics. University of Chicago Press.
Nowak, Peter. 2008-05-26. “Wireless spectrum: Auction of radio airwaves will influence Canada’s prosperity.” CBC News
Nowak, Peter. 2010-03-04. “Budget sows confusion over telecom rules.” CBC News
January 2, 2009
The credit crisis erased $14 trillion (McKeef 2008-12-31) from world stock markets in 2008. Where does $14 trillion in world stock markets go? How can that much capital disappear from the market? The infamous year 2008 will be known in the future as the year that fundamental concepts in the moral mathematics of the market were forever changed. This credit crisis was the worst since the Great Depression of the 1930s but its ramifications may be even deeper.
How can we visualize a billion dollars? How much more difficult is it to imagine a trillion dollars?
The most recent wiki entry (2009-01-01) describes how any attempt to visualize numbers higher than a million is complicated because there are too systems of numeric names and the difference between the two scales grows as numbers get larger. Million is the same in both scales, but the long-scale billion is a thousand times larger than the short-scale billion, the long-scale trillion is a million times larger than the short-scale trillion. The short scale system is used in the US and a long scale system is used in the UK. The short scale system of numeric names means every new term greater than million is 1,000 times the previous term: “billion” means “a thousand millions” (109), “trillion” means “a thousand billions” (1012), and so on. Long scale refers to a system of numeric names in which every new term greater than million is 1,000,000 times the previous term: “billion” means “a million millions” (1012), “trillion” means “a million billions” (1018). (wiki).”
6 zeros = 1 million, a thousand thousands or (106)1, 000, 000
8 zeros = a hundred million (108) 100, 000, 000 this image
9 zeros = 1 billion in the short scale system used in the US = a thousand millions or (109) or 1,000,000,000
12 zeros = 1 trillion in the short scale system used in the US = “a thousand billions (1012) or 1,000,000,000,000
12 zeros = 1 billion in the long scale system used in the UK: 1,000,000,000,000
18 zeros = 1 trillion in the long scale system used in the UK is a million billions (1018) or 1,000,000,000,000,000,00
1,000,000 6 zeros = 1 million, a thousand thousands or (106)1, 000, 000
“World stock markets ended on an uptick for the year on Wednesday, after some bourses registered their worst annual losses in history. Global stocks as measured by the MSCI world index ended up 0.76 percent for the day and posted their first monthly gain in seven months, but lost 43.36 percent for the year. About $14 trillion (9.6 trillion pounds) in market capitalisation was erased from world stock markets in 2008 in the wake of the worst credit crisis since the Great Depression of the 1930s. “It has been a shocking year, hardly anything was spared in the carnage,” said Michael Heffernan, strategist at Austock Group in Australia. U.S. stocks edged up on Wednesday and saw their first monthly gain in five months, but the year has been the worst for Wall Street stocks since the Great Depression (McKeef 2008-12-31).”
December 31, 2008
Deborah Yedlin (2008-12-30) of the Calgary Herald’s Business section succinctly summarized the economic nightmare of 2008 in which the investment banking industry collapsed, Chicago school economics theories were debunked and their heroes dethroned, trusted risk management managers were vilified, and the axis of financial power shifted from the West to the East.
“The consequences of the lack of regulation in the shadowy subprime housing market, and the ability of banks to get loans off their balance sheets and have investment banks repackage them as rated securities, allowed for the spreading risk. It was a practice that was supposed to ensure if something went bad, the damage would be contained because the exposure would be spread out. It was an axiom that was lent an even greater reliability because U. S. Federal Reserve chairman Alan Greens-pan was a believer in it. As many are now painfully aware, the dominos began to fall when two hedge funds at Bear Stearns collapsed in late 2007. This started the clock ticking on the 84-year-old investment bank, which proceeded to lose the confidence of investors and counterparties and was sold post-haste to JP Morgan Chase in March for $10 a share with the “help” of the U. S. Federal Reserve and its investment banking veteran, Hank Paulson (Yedlin 2008-12-30).”
“Nobel Prize-winning economist Paul Krugman, in opining on the multi-billion fraud perpetrated by Bernard Madoff, suggested one of the reasons he was not discovered was because of society’s worship of the wealthy. Too many, he said, have drawn the conclusion that people who have made huge sums of money must be very smart and to question these individuals would be to insult them (Yedlin 2008-12-30).”
Webliography and Bibliography
Yedlin, Deborah. 2008-12-30. “Storybook year ends in economic nightmare.” Calgary Herald.