As Bell and Astral sought to defend their plan, a familiar enemy emerged - Netflix. What does a U.S.-based Internet video service with roughly two million Canadian subscribers have to do with a mega-merger of Bell and Astral?
My weekly technology law column (Toronto Star version, homepage version) notes that for the past few years, it has become standard operating procedure at CRTC hearings to ominously point to the Netflix threat. When Internet providers tried to defend usage based billing practices that led to expensive bills and some of the world's most restrictive data caps, they pointed to the bandwidth threat posed by Netflix. When cultural groups sought to overturn years of CRTC policy that takes a hands-off approach to Internet regulation, they argued that Netflix was a threat that needed to be addressed. So when Bell and Astral seek to merge, they naturally raise the need to respond to Netflix.
In this decade, it is the Internet's turn as over-the-top video services such as Netflix are viewed as threats to established Canadian broadcasters, broadcast distributors, and content creators.
To date, the CRTC has largely skirted the issue by pointing to studies that suggest that Netflix and other over-the-top video providers have only had a minimal impact on the consumer market. But that won't last. Whether Netflix or the myriad of other online video services - from YouTube's forthcoming subscription services to the National Film Board's documentary film Netflix competitor (scheduled to launch in 2014) to sports leagues offering season packages for Internet distribution to film studios launching their own services - the online distribution model is only going to increase in popularity.
Rather than claiming limited impact, the CRTC should embrace the trend by concluding that the services are a boon to both consumers and content creators consistent with its policy mandate that does not require regulatory change or protection for established Canadian broadcasters.
For consumers, the benefits are obvious with more choice, greater convenience, and lower prices.
Creators also benefit from the proliferation of these services by virtue of the heightened competition for their content. In years past, the competitive landscape in Canada was limited to a handful of broadcasting organizations. The entry of new competitors means there will be a larger ecosystem of distributors, intermediaries, and original producers all vying for enough content to make a compelling offering to consumers.
The established players unsurprisingly view the new entrants as a threat since they offer competitive content at a fraction of the price of a typical cable or satellite bill, increase acquisition costs, and free consumers from being locked into a small number of service providers.
Broadcasters and some content creator groups may be comfortable with a highly regulated system that provides a steady stream of revenue, but the new environment creates a more competitive landscape and the promise of increased demand for new creative works. Viewed in that light, the shift toward a robust online video market should be welcomed by the CRTC with open arms, not viewed warily as a threat in need of regulatory intervention.
The book includes two articles on technological neutrality, whose inclusion as a foundational principle of Canadian copyright was a landmark aspect of the copyright pentalogy. The message from the Court is clear: copyright law should not stand in the way of technological progress and potentially impede the opportunities for greater access afforded by the Internet through the imposition of additional fees or restrictive rules that create extra user costs. Viewed in this light, technological neutrality as a principle within Canadian copyright may have the same dramatic effects on the law as the articulation of usersâ rights did in 2004.
Greg Hagen's discussion of technological neutrality considers its potential application to contentious copyright policy issues. For example, Hagen argues that the principle of technological neutrality can be used to create new exceptions to the prohibition on circumventing technological protection measures (TPMs, often referred to as "digital locks") and to strike down some prohibitions (which make user rights subject to not circumventing a TPM) on the basis of a conflict with the rule of law. Hagen notes that anti-circumvention legislation favours incumbents over new market rivals, raising concerns about whether such rules meet the technological neutrality principle articulated by the Court. Indeed, Hagen suggests that courts should be empowered to establish new exceptions to the anti-circumvention rules in order to preserve technological neutrality.
The TPP has rapidly become of the world's most significant trade
negotiations, with participants that include the United States,
Australia, Mexico, Malaysia, New Zealand, Vietnam, Japan, and
Canada. There is a veil of secrecy associated with the TPP,
however, as participants are required to sign a confidentiality
agreement as a condition of entry into the talks. Despite
those efforts, there have been occasional leaks of draft text that
indicate the deal could require major changes to Canadian rules on
investment, intellectual property, cultural protection,
procurement, and agriculture.
My weekly technology law column (Toronto
Star version, homepage
version) notes the Canadian government has adopted several
measures to guard against leaks by departmental officials.
According to documents obtained under the Access to Information
Act, a November 2012 email to government officials noted that
their access to TPP texts was conditioned on "Secret" level
clearance, an acknowledgement that all texts are watermarked and
can be traced back to the source, and confirmation that no sharing
within government is permitted without prior approval.
Those documents indicate that the first secret industry consultation occurred weeks before Canada was formally included in the TPP negotiations in a November 2012 consultation with telecommunications providers. All participants were required to sign non-disclosure agreements.
Soon after, the circle of insiders expanded with the formation of a TPP Consultation Group created as part of the trade talks in New Zealand in December 2012. Representatives from groups and companies such as Bombardier, the Canadian Manufactures and Exporters, Canadian Agri-Food Trade Alliance, and the Canadian Steel Producers Association all signed a confidentiality and non-disclosure agreement that granted access to "certain sensitive information of the Department concerning or related to the TPP negotiations."
This is not the first time DFAIT has tried to establish a secret insiders group that is granted preferential access to proposed treaty information not otherwise available to the public. During the Anti-Counterfeiting Trade Agreement negotiations, the department planned for a similar insider group - called a Trade Advisory Group - that initially included representatives from the music, movie, software, and pharmaceutical industries. The plan was scuttled only after the department's intention became public.
While the need for business insight as part of trade talks is understandable, the two-tier approach raises serious concerns about the lack of transparency associated with Canada's global trade strategy. As the Canada - EU Trade Agreement has begun to founder, Canadian officials have become increasingly tight-lipped about the specific concerns associated with the agreement. By contrast, European officials regularly update both elected officials and the general public. In fact, Europe has become the primary source for information about where Canada stands in the negotiations.
The creation of a secret TPP insider group suggests that the government is shying away from public consultation and scrutiny of an agreement that could have a transformative effect on dozens of sectors. With TPP negotiations set resume in Lima, Peru in less than two weeks, Canada should be increasing efforts to gain public confidence in the talks by adopting a more transparent approach.
Industry Minister Christian Paradis appeared before the Standing
Committee on Industry, Science and Technology last week and was
asked what he thought Canadians would say about wireless pricing.
Paradis instead indicated what he would tell them:
I would tell them that when we compare with our peers, we are in the middle-average, we dropped down by almost 20% and this is a work in progress. We will continue. We are dedicated to have a fourth player and we will do whatever we can in terms of policy to achieve this. Frankly, so far time gave us reason.
If this is a work-in-progress, is the government prepared to do more? Apparently it is, as Paradis also told the committee:
When you talk about the roaming and the tower sharing, we announced broader measures, and if we have to intervene more we will.
The first section of the book features three
chapters focused on important administrative law questions about the
standard of review as well as an attempt to place the Supreme Court's
copyright jurisprudence within a larger context. With all five cases
originating with the Copyright Board of Canada, the interplay between
the Copyright Board and Canadaâs appellate courts is at issue throughout
the five cases, with two decisions - Rogers Communications Inc. v
Society of Composers, Authors and Music Publishers of Canada and Alberta
(Education) both specifically discussing standard of review issues.
The implications of Reynoldsâ chapter extend to future fair dealing cases, as he notes that "one conclusion that we can draw from Alberta (Education) is that fairness (in the context of fair dealing) is not as discretionary a concept as it appears to be. Alberta (Education) and Bell clarify that the purpose of the Copyright Act requires a broad, liberal approach to fairness. By implication, then, fairness is not broad and open-ended; rather, it is infused with certain expectations with respect to the way in which it is to be applied (namely, in a large and liberal manner)."
Paul Daly is more critical of the administrative law implications of the decisions in his chapter, Courts and Copyright: Some Thoughts on Standard of Review, warning that there is a risk of confusion for lower courts. Daly is particularly critical of the Courtâs refusal to accord deference to the Copyright Board. He argues that the Copyright Board is far more than a rate setting tribunal. Rather, it is the body "best positioned to identify and develop the underlying principles of the Act."
Daly's chapter also considers the administrative law implications of the decisions beyond intellectual property. He notes that lawyers are likely to try to extend the administrative law findings beyond intellectual property and, in so doing, will undermine the principle of deference in administrative law decisions.
Margaret Ann Wilkinson attempts to place the copyright pentalogy within the broader context of the Courtâs jurisprudence in her chapter, The Context of the Supreme Court's Copyright Cases. She notes that copyright has assumed an increasingly important role within the Courtâs docket, yet there has been relatively little scholarly attention paid to how copyright fits within the larger jurisprudence of the Court.
Wilkinsonâs study brings together the copyright pentalogy and the five other copyright cases rendered over the past decade: Théberge (2002), CCH (2004), the Tariff 22 decision (2004), Robertson (2006), and the Toblerone decision (2007). Wilkinson traces the judges participating in these decisions, noting that there has been a steady evolution of which judges have participated. Further, there are no discernable patterns among the common and civil law judges. Wilkinson identifies the most active Supreme Court justices on copyright, with Abella J having written or co-written reasons for all but one copyright-related case since she joined the Court in 2004.
I am delighted to report that this week the University of Ottawa Press published The Copyright Pentalogy: How the Supreme Court of Canada Shook the Foundations of Canadian Copyright Law,
an effort by many of Canada's leading copyright scholars to begin the
process of examining the long-term implications of the copyright
pentalogy. The book is available for purchase and is also available as a
free download under a Creative Commons licence. The book can be downloaded in its entirety or each of the 14 chapters can be downloaded individually.
This is the first of a new collection from the UOP on law, technology
and society (I am pleased to serve as the collection editor) that will
be part of the UOP's open access collection.
This book features fourteen articles on copyright written by independent
scholars from coast to coast. The diversity of contributors provides a
rich view the copyright pentalogy, with analysis of the standard of
review of copyright decisions, fair dealing, technological neutrality,
the scope of copyright law, and the implications of the decisions for
copyright collective management.
Contributions are grouped into five parts. Part one features three chapters on standard of review and the courts. Part two examines the fair dealing implications of the copyright pentalogy, with five chapters on the evolution of fair dealing and its likely interpretation in the years ahead. Part three contains two chapters on technological neutrality, which the Court established as a foundational principle of copyright law. The scope of copyright is assessed in part four with two chapters that canvass the exclusive rights under the copyright and the establishment of new "right" associated with user generated content. Part five features two chapters on copyright collective management and its future in the aftermath of the Courtâs decisions. I'll be writing more about the individual contributions in the days ahead and will provide more information on the plans for a conference on the copyright pentalogy being planned for the fall.
The revelations came as a result of questions from NDP MP Charlie Angus,
who sought information on data, information or privacy breaches in all
government departments from 2002 to 2012. The resulting documentation
is stunning in its breadth.
My weekly technology column (Toronto Star version, homepage version) notes that virtually every major government department has sustained breaches, with
the majority occurring over the past five years (many did not retain
records dating back to 2002). In numerous instances, the Privacy
Commissioner of Canada was not advised of the breach.
Human Resources and Skills Development Canada famously suffered a massive breach last year - 588,384 individuals were affected - but less well known is that the department has had thousands of other breaches over the past few years. In 2007, a breach affected 28,651 people, yet the Privacy Commissioner of Canada was not informed and the department is unsure of whether the breach resulted in criminal activity.
Virtually no department has been immune to security breaches with nearly 100,000 individuals affected by breaches at Agriculture and Agri-Food Canada since 2008, almost 5,000 individuals hit at Fisheries Canada with no reporting to the Privacy Commissioner of Canada, and just under 200 breaches at the RCMP affecting an unknown number of people.
If a similar situation occurred involving a major Canadian bank, retailer, or telecom company, there would be an immediate outcry for tougher rules on mandatory disclosure of security breaches. Yet the federal government plays by different rules, with no liability and no legal requirements to disclose the breaches.
Successive federal privacy commissioners have urged the government to reform the badly outdated Privacy Act to at least hold government to the same privacy standard that it expects from the private sector. But those calls for reform have been repeatedly ignored.
Most recently, Privacy Commissioner of Canada Jennifer Stoddart identified twelve seemingly uncontroversial reforms, including strengthening annual reporting requirements by government departments, introducing a provision for proper security safeguards for the protection of personal information, and creating legislated security breach notification requirements. None of the recommendations have been implemented.
In fact, Canadian privacy failures dot the legislative landscape. Bill C-12, the Canadian private sector privacy bill intended to implement reforms that date back to hearings conducted in 2006 lies dormant in the House of Commons. A review of the private sector privacy law that was required by law in 2011 has seemingly been forgotten. Anti-spam legislation passed in 2010 and touted as a key part of the government's cybercrime strategy is stuck as Industry Minister Christian Paradis dithers on the applicable regulations.
No institution has greater access to the personal information of Canadians than the federal government. The public entrusts it to keep their information secure and to take all appropriate action should a security breach occur. The latest revelations indicate that the failure to live up to that trust is spread across virtually all government departments and to the political leaders that have failed to introduce much-needed legislative privacy safeguards.
The Copyright Board of Canada has released a decision
in which it admits to palpable error that resulted in a hugely inflated
tariff. The case involved a tariff for SODRAC for reproduction of music
works in cinematographic works for private use of for theatrical
exhibition. The Canadian Association of Film Distributors and Exporters
had proposed a tiered tariff approach of a maximum of 2 cents per copy
containing 30 minutes of music or more (less music would result in a
lower tariff). The Copyright Board mistakenly established a tariff of
three cents per copy, mistakenly treating three tiers as three cents. As
the Board now notes:
CAFDE was seeking a rate of 2 cents per DVD copy containing over
30 minutes of SODRAC music; the Board's interpretation leads to
royalties that are 15 times higher or even more.
While SODRAC argued that the Board could not correct its error, the Board concluded that it could noting that this resulted in palpable error. Moreover, since the erroneous Board decision actually resulted in higher tariffs than those even requested by SODRAC, it also concluded that procedural fairness was breached. The Board has now suspended the tariff and advised that will issue a new decision in the future.
Jesse Brown had an interesting post yesterday that raised concerns about the prospect that the government might
use mounting fears over cyber-bullying to re-start their failed
lawful access legislation. While it is important to remain vigilant
about the possibility of the re-emergence of Internet surveillance
legislation, I think a more important signal suggests the bill really is
dead (at least until after the 2015 election).
First, Bill C-30
actually did include a provision that could arguably be used to help address
cyber-bullying. It wasn't the provisions involving privacy and
surveillance, but rather the expansion of a Criminal Code provision on
harassment. Section 372(3) currently provides:
Every one who, without lawful excuse and with intent to harass any
person, makes or causes to be made repeated telephone calls to that
person is guilty of an offence punishable on summary conviction.
The limitation to harassing phone calls would seemingly exclude
instances of cyber-bullying. Bill C-30 would have made provision
Everyone commits an offence who, without lawful excuse and
with intent to harass a person, repeatedly communicates, or
causes repeated communications to be made, with them by a means
It is therefore possible that we could see this provision
re-surface without bringing back the surveillance provisions that
raised concern across the country.
More notably, the government recently dropped lawful access from
its national cyber-security strategy. The 2010
Cyber-Security Strategy telegraphed the intent to bring
forward lawful access legislation with a commitment to introduce a
- Requiring Internet service providers to maintain intercept capable systems, so that law enforcement agencies can execute judicially authorized interceptions;
- Requiring Internet service providers to provide police with
basic customer identification data, as this information is
essential to combatting online crimes that occur in real time,
such as child sexual abuse
Yet earlier this month, the government released its Action Plan 2010-2015 for the Cyber-Security Strategy. It removed all references related to lawful access including the commitment to legislation involving Internet service providers. Given that the document originates with Public Safety - the most ardent supporter of lawful access within the government - the removal of surveillance language provides a strong signal that it is not part of the legislative plan for the foreseeable future.
This week's CRTC mandatory distribution hearing has placed the
spotlight on a fascinating disconnect between the Commission and the
Canadian broadcast community. Despite months of telegraphing its intent
to promote consumer choice over broadcaster revenues, the first two days
of the hearing have featured repeated presentations from groups who
have not gotten the message. CRTC Chair Jean-Pierre Blais could not have
been clearer in a speech last October:
In our decision, we noted that consumers increasingly expect to be
in control of what they watch. It makes sense that consumers and the
distributors who serve them should have more flexibility in packaging
choices. While we acknowledged the value of predictable revenues to the
programming services, we decided that the days of guaranteed wholesale
rates are over. Programming services cannot expect to remain completely
insulated from the growing demand for greater choice by Canadians.
He followed that up in March by telling the production community that it "will need to compete, just like any other sector."
Despite the messaging, many of the groups seeking mandatory distribution evidently don't get it.
yesterday about the parade of failed broadcaster business
models hoping to hit the jackpot with mandatory carriage, but it
was an exchange
between Commissioner Molnar and Sun News that best illustrates the
Molnar: I just want you to tell me right now why you think it
is fair and equitable that every Canadian cable subscriber
should pay for you today.
Teneycke: Well, I think the simplest answer is I think it's
the law in the sense that the Broadcast Act itself which is why
we're here, it's why the CRTC exists, it's why the CBC exists
and sort of the foundational core of all the rules around
broadcasting and to have the privilege to have access to
Canadians' homes and who is going to be distributing and who
Wrong answer. Despite some suggestions that the Broadcasting
Act obligates the CRTC to order mandatory distribution for
some channels, the provision in the law is very general. It merely
states that the Commission may "require any licensee who is
authorized to carry on a distribution undertaking to carry, on
such terms and conditions as the Commission deems appropriate,
programming services specified by the Commission."
It is therefore the CRTC that interprets the law and it falls to the
applicants to demonstrate why their proposals fall within that
interpretation. As Blais emphasized
at the start of the hearing, the CRTC has set a very high
threshold, providing yet another signal that broadcasters
should not be relying on regulatory mandates:
Given its exceptional nature, the CRTC has set the bar very
high for obtaining a mandatory distribution order on digital
basic service pursuant to section 9(1)h). The CRTCâs policy
requires that a service seeking such an order must clearly
demonstrate its exceptional nature and that it achieves
important public policy objectives under the Act.
Each applicant must therefore demonstrate, with supporting
evidence, that its service:
- meets a real and exceptional need within the broadcasting system
- contributes in an exceptional manner to Canadian expression
- contributes in an exceptional manner to all the objectives of the digital basic service and specifically contributes to one or more objectives of the Act, and
- makes exceptional commitments to original, first-run Canadian programming in terms of exhibition and expenditures.
All four of these requirements must be met. Broadcasters have
largely emphasized the fourth criteria, citing their commitment to
Canadian content. Yet the CRTC requires far more. In a
world of almost unlimited choice available through the
broadcasting system and from unregulated Internet-distributed
voices, it is worth asking whether any service can meet the
standard of contributing in an exceptional manner to Canadian
expression. The very definition
of exceptional is to be the exception, uncommon or extraordinary.
Given the ready availability of programming alternatives, few
broadcasters will ever meet this standard.
The Sun News response was reminiscent of Bell's attitude in the Bell-Astral hearing, where the Commission was focused on the public interest and Bell paid scant attention to the issue. The Commission rejected the Bell deal and I suspect it will similarly reject the new proposals it has heard thus far (the big question will be about Starlight, the proposed Canadian movie channel that is better suited as an Internet-based Netflix competitor).
Indeed, the entire process feels dated as if a decade of disruptive technologies from YouTube to Netflix never happened. As I noted yesterday, the CRTC can and should use the high standard it has set within the law to put an end to the steady procession of poorly developed broadcast proposals that depend upon regulatory mandates for their very survival.
The CRTC kicked off its two week broadcast hearing on mandatory
distribution yesterday with a steady stream of proposals hoping to hit the jackpot by winning mandatory distribution (and
guaranteed millions) from cable and satellite distributors. I've written
(here and here)
about why mandatory distribution should be dropped altogether, but
yesterday's hearing provided the best evidence yet. CRTC Chair
Jean-Pierre Blais started the hearing by making it clear
that the Commission would establish a very high threshold - consistent
with the Act - before forcing any Canadians to pay for channels they may
not want. Over the course of the day, no one came close to meeting even
a low threshold.
As the hearing veered from proposals backed by studies suggesting
consumers weren't interested in their product to claims that broadcaster
costs were "totally retarded", it became apparent that the mandatory
distribution process is a last gasp for many failed, failing or never
started broadcast proposals. The Commission heard from channels that broadcast
distributors won't carry, that advertisers won't support, that few subscribers pay for, and that don't
have any content (user generated content was the answer for two such
proposals leading one Commissioner to ask why people wouldn't just watch
YouTube). Even the Sun News Network, the headliner of the day, acknowledged that its complaints about undue preference by
other distributors would not meet the legal standard, that it is already
available to 70% of cable subscribers, and that Videotron, which shares the same parent
company, has not placed the channel on basic service, even though it
is seeking an order from the CRTC requiring everyone else to do so.
No one wanted to acknowledge they could try competing in the
marketplace for subscribers or could launch an unregulated over-the-top
Internet-based service. Instead, the preferred model is to have
the CRTC require millions of Canadians to pay for their service
through mandatory distribution. All of this leads to a
broadcast catch-22. If consumers want your service, there is
seemingly no need for mandatory distribution since there is the
prospect for marketplace success. If consumers don't want
your service, forcing them to pay for it is rightly viewed as
unfair (no matter what the Broadcasting Act might say about
encouraging Canadian content).
The CRTC should use this hearing to put an end to this bad version of Regulatory Dragon's Den (with consumers' money at stake). For the new proposals, it should affirm that broadcasters need to convince consumers, not commissioners, that they have something worth buying. For broadcasters seeking renewal of mandatory carriage, it should send a message that the gravy train is over by rejecting price increases and limiting any renewal to three more years with notice that no further extensions will be granted. If the service is a necessary public service, the government should support it. If not, the market should decide. Either way, by the time Blais' term concludes in 2017, the CRTC should be out of the business of being the last hope for uncompetitive broadcast business models.
On the congratulatory side, Blais noted the Canadian film and television
production had a record year in 2012, growing by over $500 million over
the prior year, by far the highest total and fastest growth in over a
decade. Canadian television production led the way, increasing 21.3 per
cent in 2011/12, for a ten-year high of just under $2.6 billion. Most of
the increase was due to English-language programming, with fiction
production growing by over 41 per cent.
Yet there was a second comment that garnered less attention, but that may ultimately prove more important. After encouraging the industry to become more innovative and entrepreneurial, Blais warned "you will need to compete, just like any other sector."
For example, most of the funding for the record amount of
Canadian English-language television programming came from
taxpayers and broadcasters, not the original producers of the
content. According to Profile
2012, an annual report on the state of the industry, only
ten per cent came from private funding such as production
companies and private investors. Canadian distributors covered 18
per cent of the total costs, with foreign distributors kicking in
an additional nine per cent.
The notion of competing in the market should take centre stage
this week as the CRTC conducts its hearing on whether Canadians
who subscribe to cable and satellite television packages should be
required to pay for channels such as Sun News Network and
Starlight, a proposed all-Canadian movie channel. The regulatory
process has been likened to winning the lottery, since channels
selected for mandatory carriage are guaranteed millions in revenue
regardless of whether Canadians watch or even want the channel.
That shift in approach would represent a significant change in Canadian broadcast policy, effectively establishing a framework that requires the industry to compete for subscribers. As CRTC Chair Blais would say, just like any other sector.
The 5-year limitation period for Shaw to sell the spectrum to an incumbent does not come up until September of 2014. So I don't expect a decision from Industry Canada until September of 2014 or thereabouts. Obviously, it's very useful spectrum for us to provide LTE services, so if we're not allowed to buy it, we'll need to figure something else there.
When asked in a follow-up whether there wouldn't be some clarification of that prior to the spectrum auction, Engelhart responded that he did not expect that to happen.
The tough talk was welcome, but months later, the CRTC has struggled to get Pecon Software to pay up. Liberal MP Lawrence MacAulay asked the government to provide an update on the action and Canadian Heritage Minister James Moore provided the following update to the House of Commons on Friday:
The CRTC is now working with the Canadian High Commission in India to facilitate communications with the ministry and ensure the service of documents. Once the Indian ministry has attested to the fact that the documents have been served, Pecon Software Ltd. will have 30 days to pay the penalty or file representations with the CRTC.
In other words, more than six months after the CRTC filed the necessary documents in India, it is still not clear whether the company has even been served with them. That isn't the CRTC's fault, but it does illustrate the challenge of enforcing the do-not-call list against foreign telemarketers which may involve more bark than bite.
We want to enhance competition and investment in this country, and this is why we adopted this policy back in 2008 for the AWS spectrum. Let me say that the price went down by an average of 11% since then, and we will continue this way with the 700 megahertz spectrum. We launched consultation with the industry to make sure that we enhance competition and provide better choice and better rates for our consumers.
The Conservatives' policy on wireless competition solidified in 2007, when Prime Minister Harper shuffled then-Industry Minister Maxime Bernier (who most believed was opposed to government intervention in the form of a set-aside or other measures) with Jim Prentice. Within months, Prentice unveiled the government's policy with the headline "Government Opts for More Competition in the Wireless Sector." In case there was any lingering doubt about where the government stood, the release noted:
Recent studies comparing international pricing of wireless services show Canadian consumers and businesses pay more for many of these services than people in other countries. These services are key to strengthening the competitiveness of Canadian business.
Despite these measures, the policies have had only limited success. Prices have declined only modestly and the vision of robust competition from a strong fourth carrier remains a distant hope (though the situation may be better in Quebec with a stronger fourth carrier and more aggressive provincial regulation). Moreover, there is a sense that the new entrants may throw in the towel, cashing out to the incumbents and leaving Canada with higher prices and further reduced competition.
The responses to the recent consultation on spectrum transfer makes it clear that half-measures will no longer work. Past efforts have included set-asides without fully addressing roaming and tower sharing; foreign investment without fully opening the market, or new spectrum with caps that do not allow for a robust competitor. The response to spectrum transfer issue suggests that the government should either go all-in or it should be prepared to declare that its policies have failed.
The incumbents are unsurprisingly opposed to further government policy measures. For example, Bell is most vociferous in its opposition as it is reluctant to even respond to Industry Canada's questions. It is opposed to a policy aimed at creating four competitors and believes that the government should encourage spectrum transfers for their most optimal use (never mind the hoarding and non-use of spectrum by the incumbents). Further, Bell is against any caps or other measures designed to foster greater competition. Rogers is also opposed to a competitive assessment and spectrum concentration analysis. However, should the government implement such measures, it argues that it should only apply to future spectrum (thereby grandfathering its deal with Shaw).
On the new entrant side, the message is plain: either fix the competitive environment or we want out. The most obvious call for spectrum transfers comes from Mobilicity, which says the government must help to find ways to raise capital for future spectrum auctions or it should refrain from implementing any new rules on spectrum transfers. Wind Mobile and Public Mobile are more nuanced, focusing on the need for stronger policy measures to facilitate competition but making it plain that failure to do could lead to future spectrum transfers. Wind Mobile essentially says there should be no new restrictions on transfers until the government has addressed the competitive conditions in the Canadian marketplace. It points to four:
- the forthcoming spectrum auction rules will not allow non-incumbents to gain sufficient spectrum to support LTE
- non-usage of spectrum, such as in the case of Shaw, should be revoked and made available to the new entrants
- active regulation is needed to address high domestic roaming charges
- increased regulation is needed to deal with tower co-location
So where does that leave the Canadian government?
Following the incumbents' advice is a non-starter. For the past 5 1/2 years, the government has made it clear that it believes the Canadian wireless market is uncompetitive, resulting in high prices for consumers and businesses. Given the ongoing competition concerns, doing nothing is not an option. That said, neither is maintaining the current approach of half-measures. It is time for the government to go all-in with all the policy levers aimed at fostering increased competition. That will require:
- complete removal of foreign investment restrictions
- stringent restrictions on transferring set-aside spectrum to incumbents
- future set-asides and limits in spectrum holdings by single entities (as is being discussed in the U.S.)
- enforcing use-it-or-lose-it rules on spectrum so that unused spectrum is reallocated
- enforceable measures on domestic roaming and tower sharing so that new entrants have a viable path to competitiveness
- increased CRTC regulation of consumer wireless issues
- encouraging the Competition Bureau to play a more active role
Soon after the publication of my column on the digital divide in Canada, I received the following email from a reader, who lives just north of Toronto (FWIW, I've received similar letters from people within the City of Ottawa limits). The reader reacts to both the lack of access and the efforts of Xplornet to stop the government from supporting communities without access. The letter ends with an important question: will the Standing Committee on Industry, Science and Technology take the time to hear directly from Canadians without access? The full letter is posted below with permission.
Xplornet Communications has been extremely aggressive in their marketing to sell high speed service in our area with flyers in the mail as well as door-to-door literature drop-offs. However, due to topography and trees in our area, we are unable to "see" any of their towers, so even their service in unavailable to us. It seems ironic to hear of their admonishment to the Standing Committee against the government's support to help areas like ours achieve what most Canadians take for granted, i.e., access to high speed internet.
Thank you for your article. It has created a buzz amongst my neighbours. We all thought we had just slipped through the cracks. As a point of interest, I wonder if this Standing Committee actually includes anyone who does not have access to broadband?