Outdated laws prevent regulators from keeping pace with technological changes: AIMS report

An East Coast think tank argues that even though Canada’s communication landscape is substantially different than it was 20 or 30 years ago, our regulations still sport disco suits. The group says it’s time to reorganize – but how would its suggestions impact the market? Would Globalive Wireless’ situation be any different? We asked industry insiders and observers for their reactions. An independent social and economic policy think tank based in Halifax, the Atlantic Institute for Market Studies (AIMS), says the communications industry has undergone three substantial changes in the past two decades: new technologies; broadcast and telecom convergence; and increased competition. “Despite these fundamental shifts, the structure of Canada’s communications regulatory institutions remain little changes from the 1970s and ‘80s, and now works to the detriment of Canadian consumers and businesses,” writes AIMS analyst Ian Munro in his report, “The End of That 70s Show: Rethinking Canada’s Communications Regulatory Institutions for the Twenty-first Century.” Munro argues that economic regulation is inefficient, and duplicated between government departments. He says cultural regulation continues, even as new technologies erode the need for it; and that decisions regarding culture “that rightly should be made in the political arena remain largely in the bailiwick of the CRTC.” The report offers a handful of suggestions: · Wireless spectrum assignments should move from Industry Canada to the CRTC, and the commission should adopt Industry Canada’s practice of employing auctions. · Competition issues should be handled exclusively by the Competition Bureau; technological regulations should largely remain with the CRTC. · “Attempts at cultural regulation via the CRTC should cease... the problem should be addressed through expenditures by the Department of Canadian Heritage....” The report draws on material from earlier AIMS studies regarding spectrum-auction processesCanada’s wide-ranging auction last year. And while the company apparently passed the tests that Industry Canada conducts before granting service providers permission to operate, the firm failed the CRTC’s follow-up assessment of business ownership structures; this fall, the commission found that Globalive is too heavily controlled by Egyptian telco Orascom Telecom. and broadcast licence distributions, but it’s all new in one significant way: “That 70s Show...” was published after the CRTC made its decision about Globalive, saying that the company isn’t allowed to operate. The new wireless service provider had spent $442 million on wireless spectrum in Industry Now, it seems Globalive owns spectrum that it’s not allowed to use. If Industry Canada and the CRTC’s procedures had been more closely aligned, as the AIMS report suggests, would Globalive have been caught out like this? “The outcome is indicative of the need for better harmonization,” says Michael O'Connor, Globalive’s vice-chairman. He says it’s time to re-think the foreign-ownership restrictions altogether. “Who gains from them?” he asks, explaining that Globalive was hiring Canadians, and buying Canadian network equipment; the whole point of the spectrum auction was to improve competition for Canadians. The gap between Industry Canada’s approval of Globalive’s spectrum acquisition and the CRTC’s nay-say “delayed implementation of the policy objective, which was more competition,” O’Connor says. Mark Goldberg leads Mark H. Goldberg & Associates, a telecom industry consultancy. He says better Industry Canada – CRTC alignment wouldn’t necessarily have helped the carrier. The “no” might simply have come sooner. “Globalive would have had a single review. And the CRTC would have been the organization conducting the review.” Laurie Dunbar is a partner at Fasken Martineau DuMoulin LLP, and author of a comparative study of regulator and competition law authorities for Canada’s Commissioner of Competition. His firm represents numerous broadcasting and telecom companies, including Globalive competitor Rogers Communications Inc. Speaking for himself, he says it doesn’t make sense to blame the CRTC for Globalive’s situation. “The only question in the Globalive case was whether Globalive satisfied the Canadian ownership and control tests. It is the legislation that requires this test to be met as a precondition to new entry – not the CRTC.” He adds that if people think the rules are off the mark, “this is a policy issue for Parliament to address – don’t blame the CRTC for being out of touch.” Dunbar suggests the Globalive situation could have been avoided if the ownership review had occurred at the beginning of the auction, instead of the end. And just one agency should oversee the ownership question, he says. “One way to do this would be for the minister of Industry to ask the CRTC to investigate and report back to the minister on the eligibility of one or more bidders. The minister could then exercise his or her discretion to award a licence or permit a new entrant to participate in an auction after reviewing the CRTC’s report.” Dunbar says regulation should belong to regulatory agencies like the CRTC and the Competition Bureau. The CRTC should be the organization making decisions on ownership structures, not Industry Canada. “I think that Industry Canada still has a role to play on the international front at the International Telecommunication Union and on the development of telecom policy,” he says. “I think that Industry Canada is also quite capable of conducting spectrum auctions.” Dunbar says he doesn’t agree with AIMS’ suggestion that the government should use the auction process to distribute both wireless and broadcast licences. It doesn’t make sense to use the same process, he notes. “For the time being at least, the objectives of the telecom and broadcasting legislation are quite different.” For instance, Industry Canada doesn’t have to care what bidders do with the wireless spectrum they win. “The competitive market will drive the services that are offered and successful bidders will try to maximize their return on spectrum investment. This makes the allocation of spectrum via an auction process appropriate.” It’s a different story in broadcasting, Dunbar says. “In the broadcasting sector, where the legislation and the policy are very concerned about the content that is delivered to consumers, market forces will tend to encourage broadcasters to maximize the spectrum’s value by broadcasting popular U.S. and other foreign programming.... Such conduct is inconsistent with the current policy in favour of Canadian content and is unlikely to achieve this policy objective in the absence of regulation. “If Canadian policy in favour of Canada content was eliminated, the auction process would work fine,” he adds. Dunbar also seems skeptical about the notion of moving all competitive matters from the CRTC to the Competition Bureau. “I don’t think it is as simple as just referring competition issues to the Commissioner of Competition,” he says. “While this can be done in areas where the CRTC has forborne from regulation, there are still areas in which telecommunications carriers possess market power and where on-going regulation by the CRTC is required. “While the Competition Act is appropriate for addressing anti-competitive conduct and mergers, it is not well-equipped to engage in on-going regulation of access regimes or essential facilities in services that are not competitive.” A hybrid approach would be better, he says. “I agree with the author of the AIMS study that the goal should be to use the agency that is best equipped to address the issue in question. This might involve co-operation between agencies – for example using the Commissioner of Competition to assist the CRTC in market definition and the identification of market power – and leaving it to the CRTC to regulate sectors where market power is found to exist.” The new AIMS study also questions why little action has been taken to implement recommendations from the 2006 Telecom Policy Review Panel (TPRP) report. Goldberg notes that Hank Intven, a partner at McCarthy Tetrault, put together a “blue book” outlining all of the legislative changes required. But for the most part, not much has happened. Yes, the Competition Bureau and the CRTC seem to be working more closely, but nothing on the legislative front. “Most of the things in the TPRP require legislative change,” Goldberg says. “One of the challenges is that we’ve had minority governments,” he says, noting that the governing Conservatives might find it difficult to get bills passed because it faces so much opposition in the House of Commons. Still, the TPRP began under a Liberal government, which must have thought that the recommendations would be valuable. And the report came out under the Conservatives. One might assume two parties could come to some kind of agreement on it. “I find that somewhat disappointing,” Goldberg says, adding that in the U.S., “you’ll commonly see democrats and republicans working together,” if the bill addresses mutual interests.

Outdated laws prevent regulators from keeping pace with technological changes: AIMS report

Broadcast | December 9, 2009

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