“THIS IS THE EXCEPTION rather than the rule,” Industry Minister Tony Clement told a Parliamentary committee earlier this month regarding the Conservatives penchant for weighing in on CRTC decisions.
He quoted the number six – three varied and three referred back to the Commission – out of 2,200 telecom decisions issued by the CRTC (below is a list of the decisions and how the government ruled). These numbers don’t tell the whole story though. While on the surface six out of 2,200 is miniscule, the fact of the matter is that out of those 2,200 decisions only 30 were what we could say were major rulings that affected all or significant parts of the telecommunications sector. (A list of those 30 rulings is below.)
To understand how Cartt.ca arrived at the number 30, we looked at all telecom decisions since 2006 and reviewed them for their impact on the national telecommunications sector. For example, the 2006 local forbearance decision was one that affected the entire telecommunications sector (Cabinet overturned it with the Policy Direction to the CRTC in 2006).
Equally, the Commission’s 2007 decision on Type 2 Customer Specific Arrangements (CSAs) may have only affected the business services segment, but nonetheless, its impact was national in scope. However, a CRTC decision on a dispute between Rogers Communications and New Brunswick Power and Bell Aliant over access to power poles in the province had little, if any impact, on other providers in other regions of the country. Whereas the first two decisions highlighted are included in the list of 30, the last isn’t.
So when you consider the feds weighed in on six out of 30 major rulings, the Conservative government has intervened in 20% of the CRTC’s significant decisions since it came to power. That’s an astounding level and raises questions about the ability of the CRTC to conduct its business in the independent fashion it was created for. The Commission is an arm’s length agency of the government and therefore should have the maximum flexibility to deal with sector specific issues without fear of government intervention.
During his hour-long appearance before the House of Commons Standing Committee on Industry, Science and Technology on March 1, Clement insisted that the Conservatives only intervene in regulatory matters when they believe they adversely affect competition and customer choice. “I think our government policy is quite clear and we actually have it in the form of a policy directive to the CRTC. We’re in favour of choice and we’re in favour of competition,” he said.
Depending on what side of the fence you find yourself, you may agree or disagree with this statement, but the Conservatives’ willingness to butt heads with the CRTC over significant regulatory issues is quite clear: the numbers tell the story. But it also has to be noted that the government’s reasons for intervening in CRTC decisions may not actually be as cut and dried when it comes to competition and choice.
Before the usage-based billing fiasco, which the CRTC decided (facing enormous public and political pressure) to re-examine on its own before it was told to, Globalive Wireless is the most recent instance where the government took the CRTC to task for a ruling it didn’t believe was right and would have a negative impact on competition and consumer choice (the matter continues as the two sides get ready to appear before the Federal Court of Appeal beginning on May 18). In late 2009, the CRTC ruled Globalive’s ownership structure didn’t meet Canadian ownership requirements under the Telecommunications Act. With Egyptian wireless company Orascom holding 65% of the equity and upwards of 99% of the debt, the CRTC determined that even with a voting structure that put control of the company in the hands of Canadians, Globalive didn’t meet the Canadian ownership test.
In varying the decision, the federal Cabinet disagreed with the Commission’s assessment.
“We made as a department a factual decision that Globalive in that case was as Canadian as it needs to be pursuant to the Telecommunications Act,” Clement said during his appearance before the Industry committee.
While the decision to vary the that ruling is certainly one that favours a competitor, it may not favour competition. New entrants such as Public Mobile, Mobilicity, Videotron, and others were already coming and they were doing it with largely Canadian money. Reach your own conclusions on this, but when wireless competitors were announcing services to compete with the Big Three, one needs to question why the government needed to step in and ensure that this one company could remain in the market. It seems pretty clear that the government decision on Globalive was about a competitor, not competition.
In addition to the Globalive decision, Cartt.ca evaluated each of the other five decisions for their competition and choice effect. In a nutshell, it’s not that clear whether these decisions improved competition and choice for consumers. Some decisions reduced the regulatory red-tape that incumbent telcos faced, while others in fact ensured there would be consumer choice, potentially at the expense of a key tenet of government policy, which is facilities-based competition.
In the landmark local forbearance decision, the government created an entirely new framework on which telcos would be judged to achieve price deregulation. Essentially, it says that in addition to the incumbent telco if there are two competitors (a cable company offering telephony and a wireless operator) present in a market and that they are able to serve 75% of the customers, the incumbent telco can apply for forbearance. What does that decision do for choice? Some might say, not much. But it did enable the incumbent telcos to achieve deregulation and then price services how they wanted just like competitors could, leveling the playing field for local telephony services between telcos and cablecos.
Speed matching also does a lot for consumer choice. It gives the independent ISPs the ability to compete, service for service, with the large telco-owned ISPs without having to invest in their own network facilities. So while, speed matching is good for consumer choice, it doesn’t appear to encourage greater investment in networks and thus could potentially hurt facilities-based competition. Combine speed matching with usage-based billing – a regime, Clement says, he is unwilling to accept in any form – and it possibly sets the stage for a further erosion of investments in network facilities.
It is perhaps true that imposing UBB on the independent ISPs will inhibit their ability to compete on price and service packages with the large Internet providers, thus limiting consumer choice. But a decision from the federal government to overturn any sort of UBB scenario could negatively affect future network investments by the large ISPs and therefore hurt the competitiveness of Canada’s knowledge economy when compared to the rest of the world’s.
These assessments are perhaps simplistic, but they do show that there is some degree of inconsistency in the Conservatives’ thinking. And that’s a big problem, particular as it relates to the future independence of the CRTC in the face of federal Conservatives seemingly bent on making regulation because it might get them a few votes.
Conservatives’ interventions in CRTC decisions
2010 Globalive Wireless ownership structure (varied)
2009 Speed matching (referred back to the commission)
2007 New local service forbearance framework (varied)
2006 Local service forbearance (referred back to the commission)
2006 Voice over IP service framework (varied)
2006 Voice over IP service framework (referred back to the Commission)
UBB 2011 (NOTE: UBB is not included in the list of six because it was never officially referred back to the CRTC. The Commission initiated the review on its own but government says it will overturn a future ruling if it’s relatively similar to the original decision)
Globalive 2010 (overturned by Cabinet in controversial decision; it was subsequently quashed by a federal court, but is now heading for a hearing on May 18 with the Federal Court of Appeal)
Speed matching 2009 (referred back to the CRTC in December 10, 2009; and subject to further petitions to Cabinet from the cable companies and the telcos)
Local forbearance 2006/2007 (Policy Direction to CRTC in 2006 and then new local forbearance framework in 2007)
VoIP (issued in 2005, but then told to review decision in 2006 by Bernier; after reconsideration, government varies second VoIP decision)
