Ottawa demands telecoms strike formal mutual assistance agreement within 60 days in wake of Rogers outage

FILE PHOTO: Rogers Communications’ building in Toronto

Canada’s major telecommunications companies have 60 days to come up with a formal agreement to provide mutual assistance to avoid the disruption of a massive network outage such as the one that hit Rogers Communications Inc.’s wireless and internet services on Friday, rippling across payments, banking and emergency services.

Concrete protocols are to replace informal agreements and will go beyond a July 6 Federal Communications Commission order in the United States, which created a voluntary industry framework that will see U.S. wireless carriers support each other following natural disasters, said Industry Minister François-Philippe Champagne.

Champagne met Monday afternoon with the heads of telecommunications companies including Rogers, Telus Communications Inc., Bell Canada, Quebecor Inc.’s Videotron, Shaw, SaskTel and Eastlink.

On a conference call with reporters after the meeting, Champagne said the formal resiliency plan he ordered is a first step to ensuring the country is “better prepared if anything similar would happen,” and must include co-operation on emergency roaming as well as establishing formal communications protocols to better inform the public and authorities.

In addition, the CRTC will do a fully inquiry into root cause of outage, which compromised services from 911 emergency calls to payments processing and left swathes of Canadians without phone or internet service for much of Friday. Some were reportedly still waiting to see service restored over the weekend, but Rogers chief executive Tony Staffieri said in a statement Saturday that nearly all services had been fully restored.

Staffieri said the problems resulted from a network system failure following a maintenance update in Rogers’ core network.

The nationwide disruption, which Champagne called “unacceptable,” has led some to question the level of concentration of services in the telecom sector and is also raising questions about Rogers’ plan to merge with rival Shaw Communications Inc. in a blockbuster $26-billion deal that has already prompted a challenge from the Competition Bureau.

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That merger also requires approval from Innovation, Science and Economic Development Canada (ISED). Champagne, who is one of four cabinet ministers that oversees ISED, declined to comment Monday on what impact, if any, the Rogers’ network outage would have on that review.

Maher Yaghi, a telecom analyst at Bank of Nova Scotia, said in note prior to Champgne’s announcement that the immediate impact of the outage on Rogers will be a $65-million to $75-million cost to credit customers, and a likely loss of some customers who are frustrated by the second such outage in the past 18 months, but that increased regulatory scrutiny could also pose a risk going forward.

“Beyond the immediate financial impact, increased political and regulatory risk is a possibility,” the analyst said in a note to clients, adding that “arguments for increased competition (in the telecom space) to reduce future failure risk abound.”

Increased political and regulatory risk is a possibility

Maher Yaghi

Champagne was the first federal official to voice concerns about the concentration of services that would result from the merger of Rogers and Shaw, saying in March that the wholesale transfer of wireless assets to Rogers was “fundamentally incompatible” with the government’s objectives to increase mobile competition and lower prices.

Richard Leblanc, a professor of governance, law and ethics at York University, said earlier in the day Monday that Champagne and Rogers chief executive Staffieri should not be meeting behind closed doors, given the crucial services affected by the outage.

“Meetings should occur in public and ideally under oath like in the U.S.,” he said. “No doubt threat actors have witnessed what happened and how financial health care and emergency response can be impaired by a telecom outage.”

Leblanc proposed that telecoms should be restricted in the bundling of services and forced to lower barriers to switching services in the aftermath of the outage.

Industry Minister François-Philippe Champagne.

Yaghi, the Scotia analyst, said regulatory oversight needs to balance the risk of future failures against the increased costs of building parallel networks, including costs to consumers.

“History from other failures, in other parts of the world, shows that regulators have chosen to increase oversight rather than force a complete overhaul of the competitive landscape,” he told clients in his note.

The analyst maintained an 80 per cent probability on the merger going through, with Rogers and Shaw having struck a $2.85-billion agreement to sell Shaw’s Freedom mobile assets to Quebecor Inc. to alleviate competition concerns.

Yaghi noted that companies and governments have recovered from other massive service interruptions, including a system failure at Amazon that brought down the internet for many hours and was blamed on human error.

“System failures (due to human error, cyber or environmental disasters etc.) are painful to users and economies, however Amazon was able to identify the cause of the issue and put in place improvements to reduce the risk of future similar failures,” he wrote. “Reputational damage was transient and AWS currently sits as the market share leader in cloud services.”

But Leblanc said the Rogers outage exposed shortcomings in crisis management and “came at a very inopportune time for the company,” which is still trying to recover its reputation from “family squabbles” that led to a board overhaul and court challenge over control last year.

He noted that the network failure occurred at 5 a.m., but the first communications about it did not come until about four hours later.

“There was limited reporting on the root cause and even that it was not a cyberattack by a foreign threat actor would be helpful and enable customers to plan,” Leblanc said.

“There is a path to recovery but it involves serious attention to corporate governance, crisis management, and robust and independently audited internal controls.”

The communications protocol ordered by the industry minister Monday should address some of those concerns, but Leblanc said authorities with oversight of telecommunications services also bear some of the responsibility for what transpired last week, and that there should be assurance by regulators that internal controls are in place for maintenance, software and other updates.

“There should be a public interest in telecoms,” he said.

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