Policing the telcos

Soon — possibly before you read this — a three-member panel created by Industry Minister David Emerson last spring will publish a report on Canadian telecommunications policy. It has received thousands of pages of submissions on telecom policy questions — from possible revisions of the 1993 Telecommunications Act to the role of the Canadian Radio-television and Telecommunications Commission (CRTC) to access to telecom services. Its report could significantly affect Canadian telecom regulation.Major incumbent carriers want less regulation, and particularly fewer specific restrictions on themselves. “From our perspective, less is more in a competitive environment,” says Janet Yale, executive vice-president of corporate affairs at Telus Corp. Incumbents seek ex post versus ex ante regulation — rather than tangling the entire industry in a web of rules and reporting requirements, the CRTC should respond to transgressions and “put that bad apple in the penalty box,” Yale says.
“There’s no doubt there was a lot of pressure from the incumbents” to re-examine regulation, says Ian Jack, an Industry Canada spokesman. But they aren’t alone. Iain Grant, founder of telecommunications consulting firm SeaBoard Group in Montreal, argues that the rise of wireless services and voice over Internet Protocol (VoIP) means there is more competition even in local services than the CRTC admits. The Canadian Advanced Technology Association (CATA) says its members want the government to rely more on market forces.
Scott Bremner, manager of network infrastructure and telecom at the Dufferin-Peel Catholic District School Board near Toronto, says he would like more competition, but with measures to protect consumers and ensure consistency and interoperability. Bryn Hughes, network specialist at Vancouver Community College, says incumbents dominate the market today, but developments like VoIP could change that.

investors have shied away from new entrants

Even the regulator espouses competition. “The commission’s basic assessment is that truly competitive markets serve the consumer interest better than regulation,” said David French, the commission’s vice-chairman, in a recent Toronto speech.
Where would this leave the CRTC? In the history books, if Eamon Hoey had his way.
“Cleaning up the CRTC is just ensuring more of the same for another 10 years,” says the president of Toronto-based Hoey Associates Telecommunications Consulting Services.
“We need to close the place down,” Hoey said, adding the federal Competition Bureau could take over ensuring fair competition in telecommunications as in other industries.
Not surprisingly, the CRTC takes a different view. French says effective competition won’t necessarily appear if the regulator simply throws the market open. Regulators have declared markets open in the past and no competition has appeared, he says, often because investors did not want to back new entrants they expected would stand little chance against deep-pocketed incumbents. French says regulation must continue through a transition period.
But Lawson Hunter, executive vice-president and chief corporate officer of BCE Inc., rejects that approach. “Restricting competition to promote competition has never worked in regulatory environments,” he scoffs. Especially given “disruptive technology” like VoIP, and the entry of deep-pocketed cable-TV firms into the phone market, he says, new entrants can take significant market share.
Most in the industry take a moderate view on the commission’s future. “We think there’s a meaningful role for all the players in the system,” says Yale. Ken Engelhart, vice-president regulatory at Rogers Communications Inc., says Canada needs a specialized regulator for telecommunications. New Zealand eliminated a similar body, he says, and “it was a disaster.” Disputes now end up in court, in front of judges with little telecom knowledge. The CRTC will always have a place dealing with technical issues like access and emergency services, he says.
In fact, some favour tougher enforcement. The CRTC has made little use of what power it has, argues Chris Peirce, senior vice-president of regulatory and government affairs at MTS Allstream Inc., rarely punishing companies that misbehave. MTS Allstream argues in its submission for an independent enforcement body.
The Telecommunications Act was passed in 1993, and some say it is due for some updates. “The objectives are just too broad and they’re too non-directional,” Hunter says. “The way it’s been interpreted is that they are to protect the interests of everybody and at the same time promote competition. Well, you can’t really do that, right? I mean, in a competitive market, somebody wins, somebody loses.”
Bell, Telus and others want a preference for competition over regulation written into the act. Yale says that would make priorities clearer and guide regulators toward maximum emphasis on competition. Peirce says the objectives should focus on promoting competition, with perhaps a mention of consumers’ interests and promoting investment and innovation.

nobody is arguing against foreign ownership

French says the CRTC is comfortable with the act as it is. “The (Broadcasting and Telecommunications) acts as they stand provide a great deal of flexibility,” he says. That seems to be the incumbent carriers’ point: They would prefer an act that constrained the CRTC to emphasize free markets.
Though submissions to the Policy Review gave them limited attention, foreign ownership rules remain an issue. Foreign-owned MCI Canada argued regulations that prevent foreign-owned companies like itself from operating as Tier 1 carriers put this country in violation of the General Agreement on Trade in Services (GATS).
The rules give certain privileges to companies recognized as competitive local exchange carriers (CLECs), says Robert Quance, general manager of MCI Canada. But to be a CLEC, a company must be Canadian. “It’s discriminatory, and it’s inhibiting us from competing in the Canadian marketplace as fully as we’d like.”
And the other side of the argument? Largely nonexistent. “There really is nobody who is now objecting to lifting foreign ownership restrictions,” says Elisabeth Angus, vice-president of telecom consultancy Angus Dortmans Associates Inc. in Oakville, Ont. Hunter says the restrictions will go eventually, and Bell’s main concern is that regulation should be loosened first. “Otherwise you are running the risk that you will expose the Canadian companies in this space in weakened condition to foreign takeovers,” he argues.

government won’t set deadline for itself

The panel’s mandate includes questions of what telecommunications services are essential to all Canadians and what should be done to ensure universal access to them. Observers increasingly view broadband Internet access as an essential service, and there is some concern that Canada is not doing enough to promote it. Hoey says this country has slipped from having the world’s second highest broadband penetration — after South Korea — to fifth today, and Grant says what Canadians call broadband is significantly slower — in the five megabit per second range — than Korea’s 20-Mbps services.
And Grant questions Ottawa’s commitment to broadband access. In the last federal election, he says, the NDP’s Jack Layton was the only party leader who even mentioned it.
The panel is due to report by year-end. What happens next is murky. “I don’t think we would commit to acting on specific recommendations until we see them,” Jack says. “The minister is committed to receiving the report and taking it very seriously.” The timetable for any action Ottawa does take would depend on the recommendations, he adds. “There are too many variables at this point to give a commitment.”
“I don’t think Minister Emerson would have launched the review if he didn’t feel some change was needed,” Yale says. Telus hopes the panel will produce some short-term recommendations that can be implemented without legislative changes, she says, as well as more sweeping suggestions that can be incorporated into an overhaul of the Telecommunications Act.
Angus says the panel’s report “could be a landmark in the evolution of telecom policy in Canada.” But the key word is could. The danger, she adds, is that the report will end up on a shelf and not lead to action.
Grant predicts that whatever the panel brings forth, larger political realities, such as an election in the near future, aren’t favourable to quick results. Even if the Liberals are returned to office, Grant says, it will be at least next September before Ottawa acts on the panel’s recommendations.
Hoey says the issue is not whether the government will act on the report so much as whether the panel will produce any new ideas. He doubts that, dismissing the review as “just a bunch of old tired men talking to each other.”

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Grant Buckler
Grant Buckler
Freelance journalist specializing in information technology, telecommunications, energy & clean tech. Theatre-lover & trainee hobby farmer.

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