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Telecom Travelogues, Post II: Telecom-Media-Internet (TMI) Developments and Internet Regulation in the neo-Ottoman Empire (Turkey)

Post two in the Telecom Travelogues

Walking down the back streets of Istanbul a week ago today, Kristina and I stumbled across an amazing find: the offices of Turk Telekom tucked away in a building that had been constructed in the 1890s to replace even earlier offices that had been put into place during the submarine cable and telegraph building boom of the late-1860s.

My colleague and I, Robert Pike, write about this history extensively in our book, Communication and Empire (Duke, 2007). Following strong and historically-sensitive theories of globalization as well as those that focus on the interaction between technology and culture, we write about the relatively enthusiastic embrace of new communications technology by the leading forces in the Ottoman Empire in the last half of the 19th century.

Communication technologies were adopted reasonably quickly by the Ottoman Empire because they were seen as tools of economic development and integration into the world economy. They were also seen as rich symbols of modernity and progress. They were also seen as tools of integration for an empire still striving to consolidate its control over regions that stretched from Cairo, Egypt in the South, to Baghdad and the borders of the Persian Empire in the west, and around the Balkans up to the borders of the Austro-Hungarian empire in the north and northwestwest.

The development of telegraph lines were initially driven on by the British and French in the context of the Crimean War (1854-56). Already by 1857, however, the Ottoman’s Central Telegraph Administration had been established and work begun on a national telegraph system.

In conjunction with British investors and engineers, the Ottoman Empire’s Central Telegraph Administration set out to build a national network “from Constantinople to the head of the Persian Gulf”. Long-term exclusive concessions were signed with a variety of dubious and failed projects from the late- 1850s on before the regime finally struck a deal with what became the nucleus of the British-based Eastern Telegraph Company’s system: the company with the world’s most extensive submarine telegraph system of the time, one that ran through the Mediterranean and onto India by 1865 and subsequently to China, Japan, Australia and the rest of the Far East by the early- to mid-1870s.

The interaction between Ottoman officials and engineers, on the one side, and their counterparts from Britain and Europe, on the other, was not unique to telegraphy. Indeed, as our tour guide and local historian told us, the substantial renovations done to the Ayse Sophia during these same years also leaned heavily on architects and experts brought in from Russia and Italy. So too did efforts to write a new Constitution for the country, and for Egypt, which was brought within the relatively cosmopolitan fold of the Ottoman Empire in the 1860s, rely extensively on French and Austro-Hungarian legal experts.

By the late-1860s and 1870s, the Ottoman’s Central Telegraph Administration served simultaneously as a back-up network to the submarine cable network linking India to Britain and Europe by way of the Mediterranean and Red Sea, but also somewhat as a rival to the lines of the Eastern Telegraph Companies. Indeed, the Central Telegraph Administration’s services were substantially cheaper than those of the submarine cable colossus, but the drawback lay in the fact that the Ottoman system was less reliable and traversed the unruly ‘wild zones’ of tribal lands, thus compromising network security and a system that imperial and military administrators sought to mostly avoid.

Be that as it may, by 1871 the Central Telegraph Administration accounted for nearly 20 percent of the revenue on the Euro-India telegraph route. The telegraph was the tool of overlapping empires, but they were also the media of massive capital accumulation and cultural exchange. They were instruments of technology transfer, to use the language of our time. They were also a boon for the development of a private and commercial press in the Ottoman Empire.

As the historian of the Arabic world, Juan Cole observes,

The founding of private newspapers occurred simulataneously with the extreme speed of telegraph lines – new politics and political journalism grew tegother. By the 1860s, telegraph services allowed reception of international news through the wire services, and Otttoman and European newspapers could be shipped Alexandria and taken . .  . to Cairo and the interior (p. 112).

And as the British consul in Cairo noted in 1871, “every town or village of importance in Lower Egypt has a telegraph station”.

So, when Kristina and I were walking through the old Eminounou district of Instanbul and stumbled across an old telegraph and telephone building originally built in the 1890s, and which now advertises the availability of 100 MBps broadband Internet services on a fluttering banner outside, I was driven to see if I could negotiate access to go inside.

I’d given the chances of getting a guided tour of the facilities a one in ten shot of success, but five minutes later and we were in. Much to my surprise, a really nice young engineer fielded my entreaty, took it up with his superiors, and then took us on an hour-long tour inside. Amazing!

No pictures inside, I’d promised, because I’m not dumb and I know that all sorts of reasons, from competitive secrecy to national security, dictate a tight lid on how much information gets out. No worries, though, because I was more than happy to have just got inside. Later I was even able to negotiate a few exceptions to this rule, as we’ll see below.

The first thing one notices after walking passed the armed guard is the rows-on-rows of racks filled with equipment from Alcatel, Ericsson and, more and more as I gathered, Huawei, the Chinese upstart that has rocked the comfortable oligopoly that has ruled trade in telecoms equipment for much of the 20th century. With Nortel bankrupt, and ICTs a cornerstone of the ‘China-rising’ story, it was not surprising to see Huawei’s equipment filling rack-after-rack in the building, undoubtedly to the ‘old guys’ chagrin.

Some old Nortel digital switching equipment from the 1980s and 1990s can still be seen sitting in the racks, whirling away, but its days are numbered. As I listened to my hosts narrate a story about how Nortel had been a leading edge provider of digital telecom gear in the past, I couldn’t help but picture in my mind its former Canadian headquarters that sit not 25 kilometers from my home and how the once great company had fallen to the rapacious hands of the digital robber barons during the dot.com boom and bust that ripped across just four short years from1996 to 2000. Time, history, poof! We can learn something here.

Now, all that is left of Nortel are these old clunky machines waiting to be wound down, and a treasure trove of patents being scattered by auction on among today’s telecom and ICT leaders: Apple, Google, RIM, and so forth. Amazing what you can see from Istanbul when your eyes are wide open, and your mind as busy as can be.

The massive old building in the Eminounou district of Istanbul now dwarves the telecom gear inside. Processes of miniaturization have shrunk the space needed to house telecoms gear to a fraction of what was once required. Now, the bulk of the space in the four-floor building lies empty, just laying there dark and neglected or in some cases in the throes of being retrofitted for new equipment and purposes, as the following photo shows:

In the remaining areas where all the new and still functioning gear is held, the windows were all open but air conditioners still whirled away to keep the network switches, servers and data storage equipment cool from heat outside that hovered in the upper 30 degree range.

Crates of new equipment, most of them marked Alcatel and Huawei, lay scattered across the concrete floors of the four-floor building waiting to be opened, switched on. The 100 MBps high-speed Internet service advertised on the cheap banner hanging outside is right here, inside these boxes laying on the floor.

The advertising is, however, somewhat ahead of itself, given that only about five percent of Istanbuli business subscribers can access such high-end Internet services. However, the plans are for universal coverage of business districts across the city in the next two years. Facilities for the average Istanbuli resident, as the friendly and proud telecom engineers shepherding Kristina and I told us, will be rolled out aggressively as well, but against an unknown time frame.

Even more ambitiously from a technological sense, if not a social justice one, next generation networks (NGN) capable of blistering 10GBps information transfers are and will continue to be rolled out as part of these objectives. That is not just a pipedream, but rather could be seen in those crates of equipment lying scattered about the floor from Alcatel (France), Huawei (China) and a smattering of Ericsson (Sweden) stuff that I told you about a minute ago. In fact, some of its already in the racks.

Currently, while Internet service is relatively cheap in Turkey against OECD standards, actual levels of connectivity and use are some of the lowest amongst the OECD countries (see pp. 268-275 on prices and p. 354 for broadband Internet access levels). What takes place over the next five years or so will go a long way to determining whether those levels see a significant improvement.

Just like in the days that marked the rise of the telegraph and the commercial press in the 1860s Ottoman Empire, so too today are developments in the telecoms and Internet infrastructure fully intertwined with broad and faced paced changes taking places across the Turkish media as a whole.

Indeed, a deluge of new newspapers and television channels makes Turkey one of the fastest growing media markets in the world, according to PriceWaterhouseCoopers’ (2010) Global Entertainment and Media Outlook, 2009-2013 report (see p. 66 and also OECD CommOutlook 2011, pp. 230, 246).

Between 2005 and 2010, newspaper circulation in Turkey climbed over 55 percent in Turkey, according the World Association of Newspapers. Couple this with fast growing Internet capabilities, albeit from a low base, and there is a sense that the media in Turkey are experiencing something of a golden age, at least in industrial development terms.

This is a far cry from the hand-wringing and whinging that has taken place in many circles in Britain, Europe, Canada and the US over the past few years around claims that the media — journalism in particular — are in crisis. From my view, these cries are often overwrought, but in Turkey the idea that the media could be in crisis, at least from an economic point of view, is the furthest thing from anyone’s mind.

There’s a giant paradox in all of this, however, and one that certainly takes the glow of any claims that this is a golden age for the TMI industries in Turkey. By this I am referring to the disconnect between liberal fantasies stretching back for centuries that more media will automatically deliver more personal liberities, freedom of the press and democracy.

Global rankings consistently rank Turkey low on the scale of journalistic, media and Internet freedoms (see herehere, here and here). More media and internet connectivity, in other words, does not seem to add up to a free press. In fact, they may even subvert such things.

Deeply problematic is the stranglehold of Internet censorship that is already bearing down on all that equipment I talked about above, and which is about to get a whole lot worse next month once the new “Bylaw on the Principles and Procedures Concerning the Secure Usage of Internet” kicks into action on August 22, 2011.

The new bylaws were passed by the Turkish Telecommunications Directorate, with the blessings of the Information Communication Technology Association (ICTA) as well as the Radio and Television Supreme Court, in May of this year. The new rules set out to create a managed Turkish Internet Space bound by the rules that life online in the country shall respect and protect:

(1)  Turkish national values,

(2)  Family Structure,

(3)  Youth

(4)  Moral values.

As Eda Çataklar, a professor at the Intellectual Property Research Center, Istanbul Bilgi University states, the new bylaw has come under much criticism by many NGOs inside and out of Turkey since being passed earlier this year.

The primary flaws of the bylaws, according to Cataklar, are:

  • It is overly broad and lacks transparency.
  • mechanisms to remove URLs and banned words placed on a proscribed ‘black list’ are either inadequate or missing completely.
  • Rules governing how users establish and maintain their online profiles are vague.
  • International norms are ignored.
  • Government coercion has displaced ISPs’ own initiatives as a means for dealing with whatever Internet security problems do exist.

The push is disturbing for all of those who see communication rights as fundamental human rights. It is disturbing to a rich legacy of a vibrant and open political culture and press in the country, even if the room for manouever within that space has always been hard to decipher and tightly constrained.

The clampdown on the Internet also subverts the technological capabilities and goodwill of the staff that we met touring the offices of Turk Telekom in Eminounou. They are an affront to democracy itself, and strongly suggestive that the new Ottomanism that I heard some local professors gloat so much about during the IAMCR conference may not be as open as the Old Ottomanism of the late 19th century that I outlined above.

First and foremost, and this struck me with particular force in a way that has previously escaped me, the clampdown poses an especially harsh and oppressive threat to Lesbian, Gay, Bi, Transsexual and Transgendered (LGBTT) communities that have come out of the closet in ways that I never saw when I first lived in Turkey in the 1990s. The LGBTT community is particularly concerned that the new rules, and more specifically, its list of 160 plus banned words, will bear down hard on them and issues of sexuality as a new kind of state seeks to consolidate its power over a society in heightened state of flux.

As one person stated, if the Bylaw on the Principles and Procedures Concerning the Secure Usage of Internet prevails, “LGBTT individuals will be non-existent in the cyberworld”.

There is some hope yet that the new provisions will yet be rolled back by Turkish courts as an affront to Turkish Constitutional principles regarding freedom of expression and its commitments under European Human Rights agreements and the UN convention on civil and political rights (1966).

In the last few days while I’ve been Twittering away about these ideas in rudimentary form, one wag has repeatedly tried to tell me that the actions in Turkey are no different than those taken by governments in Australia, Canada, the US and China to regulate and control the Internet. I beg to differ.

They are much broader in scope, more opaque, and more severe than anything on offer here, although in a post that I plan to write in the next few days I will argue that things are going in the wrong direction in North America and Europe, and seem to be really coming to a head at breakneck speed in these summer days on account of:

  • the stronger push to turn ISPs into gatekeepers on behalf of the copyright industries that has gained much stronger footings in the US, Britain and the OECD countries as a whole in just the past week and the backlash against those proposals emerging from just mainstream groups (see here, herehere, here, and here),
  • the strong clamp down that seems to be occurring with respect to national security (and here)
  • the guerrilla information warfare being conducted between Anonymous, LulzSec, and a wide range of others, on the one hand, and the ‘security-state’ and military-information-media-entertainment (MIME) apparatus, on the other, are deeply disturbing (see here, here, here, and here).

Overall, standing from the shores of the Sea of Marmara and at a critical juncture in world history, one thing became somewhat clearer to me and that is, yes, what happens in Istanbul is deeply interconnected with what unfolds here. And for me, perhaps we can take some solace in the hope that the Turkish people struggle to find and secure their own freedoms, we will do the same with respect to ours, as will Internet users worldwide.

And on that point, well, we need to think of the politics of TMI issues not just in terms of whether they occur in Turkey, Canada, China or Britain, but as essential to our everyday lives wherever we live, and thus in need of the strongest recognition possible that Internet freedoms and communication rights are fundamental human rights regardless of where we stand.

On this point, there is more than a ray of hope, as some of the latest thinking about Internet access and connectivy as a fundamental and universal human right so ably and eloquently demonstrates. This is quite hopeful, actually. I hope you feel the same way, too.

The Telecom Travelogues, Part I: News Corporation in Flames, Media Moguls on Trial

I’ve been gone for two the past two weeks. Traipsing the streets, alleys and waterways of Istanbul with Kristina, my wife.

We conferenced, we hung-out with friends, and we partied at a swank event held for IAMCR conference goers at the Archeology Musuem in the heart of the old part of Istanbul, Sultanamet.

We gazed about the Hagia Sofia, the world-renowned Christian Church constructed in the 5th century (CE) and subsequently remodeled into a mosque after the Ottoman Empire conquered the city in 1453. The Topaki Palace was a sensorial blend of opulence, barbarism, and glories of a cosmopolitan empire whose time has passed.

Perched atop the slopes of the Bosphorous fjord that separates Europe from Asia, we could see a wide swath of the landscape. And from where I stood, the following five telecom-media-Internet (TMI)-related issues kept coming into view:

  1. The News of the World telephone hacking scandal.
  2. The deal between Hollywood and ISPs providers in the United States — Verizon, AT&T, Comcast, Time Warner, etc. – that will see the latter take on greater gate-keeper roles vis-a-vis online content.
  3. The export of bandwidth caps and the pay-per Internet model to the U.S. from Canada, as Time Warner and Verizon get set to follow the adoption of such measures by Comcast and AT&T (in 2008 and in May 2011, respectively).
  4. The outbreak of information guerilla warfare between Wikileaks, Anonymous, LulzSec, and so forth against Paypal, Visa, Disney, News Corp, Lockheed Martin, Arizona State Police because they see all of these entities as links in a much bigger cyber-military industrial chain (also see James Der Derian’s Virtuous War for one of the best scholarly treatments of this issue).
  5. The relationship between rapid TMI expansion and economic development in Turkey versus the reality of a strong state with a solid grip on Internet censorship and control, a system of moral and political regulation that the LGBTT community in the country expects will hit them especially hard.

I will write about these things in the next few days. The first post, though, is on the strange illusion that the News of the World telephone hacking scandal might somehow drive the final nail in the coffin for the much reviled, and seldom revered, Media Mogul.

First up, the dominant owners and hands-on controllers at News Corp, the world’s third largest media conglomerate: Rupert and James Murdoch. The News of the World telephone hacking scandal that has engulfed News Corp has already wiped out twenty percent of the media behemoth’s market capitalization in two weeks, roughly $8 billion (see here).  This is indeed a steep cost for transgressing the boundaries of law, good taste and solid journalism.

The Murdoch Family wield controls in News Corp despite the modest scale of their economic ownership stake.  While the family only owns about 12.5 percent of the capital stock of the company, it controls the company through voting shares and via positions in the executive and on the company’s board of directors. In narrow terms, the family’s coffers have definitely taken a hit.

News Corps’ telephone hacking scandal threatens bigger damage to the media conglomerate. Its contentious attempt to gain the remaining sixty percent ownership stake in BSkyB that it does not yet control has been suspended. The News of the World (NOTW) — a hundred and sixty some odd year old popular low brow paper — has been shuttered. The NOTW editor-in-chief (Rebecca Brooke), a sub-editor (Clive Goodman), Prime Minister Cameron’s director of communication and ex-editor at the NWOT (Andy Coulson) and two high ranking police officials have all resigned and/or been arrested (see herehere and here for chronologies and over-views).

This was not a one off deal. It has been going on for years, with episodic attention to this aspect of the sordid underbelly of journalism in the UK spurred on at the instigation of journalist Nick Davis and Guardian newspaper. Now, the subject has has been dragged out of the closets and once again been put into the spotlight. Heads may yet role.

What is interesting, however, is the extent to which observers are already extrapolating from the troubles of the Murdochs to the fate of media moguls as a whole. Indeed, many are predicting the imminent demise of the media mogul, the widely reviled character of the 19th and 20th centuries ‘industrial media age’, as if somehow the travails of News Corp and Mssrs. Murdoch — Rupert and James — are an index of what will happen to the media industries as a whole, and to media barons specifically.

The Economist seems to hope for the demise of the media mogul writ large should the Murdochs fall. It worries, however, that the world will be a worse off place without News Corp. The giant global media conglomerate with $40 billion plus per annum revenues and a vast stable of globe straddling entities — 20th Century Fox Films, Fox News, BSkyB, MySpace, Wall Street Journal, the Times, etc — plays an valuable role in the media and entertainment world, and in journalism and politics, too. It’s loss would impoverish us all.

I doubt that any such thing will come to pass. However, I do agree with Jeff Jarvis, albeit for entirely different reasons that will become evident below, that should this somehow turn out to be the beginning of the end for News Corp, such an outcome is not to be lamented.

Jeff Jarvis agrees with The Economist that the media mogul as a ‘type’ is on its last legs. He has some great stories from a long career that basically boils down to the idea that, individually, media barons are quirky and drawn to power and like to use it for personal gain and on a whim. Some moguls are pleasant and unobtrusive (he lists Rupert Murdoch as one of these types, based on his own personal experience); most are not and come across as tiny tyrants. All, however, Jarvis declares, are doomed to die, slaughtered by ineptitude and the Internet.

I first heard this chain of reasoning that stretches from the phone hacking scandal and News Corps woes, on the one side, to predictions about the imminent death of the mogul, on the other, last week when the New York NPR station WYNC contacted me in Istanbul to do an interview. The topic? The role of the media baron in American media history and “whether Rupert Murdoch is one of the last”.

The story was temporarily put on the shelf, for one reason or other. In retrospect, it is clear that the NPR folks were on to something. I hope they’ll pick it up again and run with it.

My answer, though, from the get-go is no, Murdoch is not the last of a dying breed. The future of the media mogul rests on much bigger forces in finance, markets and technology than the hacking scandal. The media mogul type, as I will argue, almost by design, gives rise to intrigue and scandals like those now afflicting the UK press. That is the ‘causal chain’ in such events, rather than the reverse one assumed by the Economist, Jarvis, etc., where scandal takes down moguls.

These events will undoubtedly cause NewsCorp to flounder, as I have already clearly indicated above, and maybe some heads will roll. But I do not believe for a moment that the phone hacking scandal will, by some lengthy chain of reasoning, lead to the death of the media baron.

To be sure, the media baron no long cuts as an imposing figure as Jay Gould, William Randolf Hearst or Lord Beaverbrook did in the 19th and early 20th centuries when the ‘industrial media age’ was taking root.  As Eli Noam (2009) indicates in his authoritative Media Ownership and Concentration in America, the number of owner-controlled media firms in the U.S. fell from 35 percent to just 20 percent between 1984 and 2005 (p. 6).

So maybe the Murdochs are hang-overs from a time now slipping irretrievably into the past?

I don’t think so. They may have declined overall, but not as much as Noam and others suggest. In fact, far from being a dying breed, the mogul type is actually quite prominent right across the TMI industries, and is in the process of being retrofitted for the digitally-networked media age.

Three of the top ten firms in the U.S., the largest and most developed medie economy in the world, are owner-controlled: Comcast (Roberts), News Corp (the Murdochs), Viacom-CBS (Redstone). Steve Jobs also holds a significant, but not controlling, stake in Disney. Other significant players still stand out as well, notably the New York Times (the Ochs family) and the Washington Post.

In Canada, the mogul cuts an even more imposing figure, with 7 out of the 10 biggest mediacos being owner-controlled (eg. Shaw, Rogers, QMI, Astral, Thomson-Reuters, Cogeco, Toronto Star). A similar scene prevails in Latin America, Russia and some parts of Europe too.

Of the top ten global media players, five are owner-controlled — Comcast (the Roberts family), News Corp (the Murdoch family), Viacom-CBC (Redstone family), Bertlesmann (remnants of the Bertlesmann and Mohn families) and Thomson Reuters (the Thompson family).

The media baron is not just a hold-over from the industrial media age, either, but a prominent feature among seven of the leading ten Internet firms as well: Apple (Jobs), Facebook (Zuckerberg), Google (Page, Brin and Schmitt), Microsoft (Gates and Ballmer), Yahoo! (Yang), IAC (Diller and Malone) and CBS (Redstone). In sum, new technologies and the Internet firms have not whisked away the owner-controlled media organization.

News Corps’ organizational structure thus is a mirror of this broader phenomenon and an index of something unique and deeply intriguing about the media, even in the 21st century and at a time when Google, Apple, Facebook and so forth are moving ever closer to centre stage. News Corp embodies the resilience of the media mogul form initially forged in the 19th century, and provides us with an opportunity to understand just how this seemingly anachronistic form is being retrofitted for the 21st Century TMI industries.  For the time being, we might call the new versions TMI Barons.

The media mogul has been familiar figure since the late-19th century industrialization of the press and entertainment industries, typically more prone to being reviled than revered. The Robber Baron Jay Gould was the target of public scorn when he ruled the Western Union, Associated Press, a couple of New York dailies, and railways across the country in the 1870s and 1880s (see Richard R. John’s Network Nation or my review of it).

All of these entities worked in tandem to advance the interests and intrigues of the movers and shakers arrayed around Jay Gould. They served the Republicans in the 1876 elections especially well, too, essentially throwing the outcome to that Party’s candidate over the Democratic opponent.

Upton Sinclair revived the indictment of the media mogul in his hugely popular The Brass Check, first published in 1920 and already in its ninth printing with over a 150,000 copies sold by 1928. As the power of the media mounted in the 20th century, Orson Welles’ 1941 film Citizen Kane updated the indictment of the press baron for the cinema, with its key protagonist, Charles Foster Kane, a media mogul cut from the mould of William Randolph Hearst. The film, like Orson Welles’ War of the Worlds radio drama before it, served as a meditation on power and persuasion in the age of the mass media.

The basic problem of the media mogul form of ownership and organizational structure stems from the fact that it personalizes power and politics. It colonizes public space and discourse with powerful personal agendas.

Its very form and the unremitting flash of all-too-many of those who occupy the role clash with popular and journalistic sensibilities. The ‘free press’, as A. J. Liebling (1947) famously quipped, as a result belongs mostly to those who one. Criminality is not foreign to the role, but at least episodically seems endemic too it, as the Corporate Fraud Task Force’s Report to the President put into place after the collapse of the dot.com bubble regularly demonstrate (see, for example, pp. 25-30 in the 2008 report)

The ‘familial model’ of ownership, control and politics that are the hallmark of News Corp, as the Financial Times stated the other dah in direct reference to the events at hand, are midieval in character, opaque and impenetrable. News Corp has always been close to the centres of political power in the US, UK and wherever it operates, it brazenly wields its influence in way that are as much opportunistic as they are ideological. That company’s owners do use political influence for their own commercial ends, there is no doubt.

News Corps’ board of directors is also one of the most politicized of the leading global media conglomerates. Whereas bankers, financiers and commercial goods purveyors such as Proctor and Gamble stack the boards of most major media conglomerates, of the seventeen members of News Corps’ board, three are from the Murdoch family (James, Lachlan & Rupert) and two are ‘global war on terror’ veterans closely aligned with the Bush II Administration (2000 – 2008):  Viet Dinh, a Georgetown University law school professor and one of the main architects of the Patriot Act, and former Spanish President during the ‘war on terror years’, José María Aznar.

The sprawling global media behemoth’s second largest share-holder is Prince Alwaleed bin Talal, the nephew of the King of Saudi Arabia. He is also one of the Murdochs’s steadfast allies on the board and business partner in other joint Arabic media ventures with News Corp (see News Corps’ Annual Report, 2009, p. 112). All of these murky political ties irretrievably compromise News Corp’s ability to live up to the standards of autonomy from governments demanded by the most mainstream theories of a free press.

The fact that the Murdochs have played their political connections opportunistically and ideologically in equal measure has served them well. To the untrained eye, the fact that the company endorsed Tony Blair’s ‘third way’ Labour Party in the UK at the same time that it stood behind the rabidly conservative Bush II Administration in the US might seem to be ideologically incoherent. However, such a stance has the virtue of allowing News Corp to further its commercial interest regardless of the political context that prevails at any single moment in time.

In Britain, these ties have persisted with the discredited NWOT editor Andy Coulson having served as advisor to Brit PM Cameron before the 2010 election and then as his director of communication after the election, until is resignation last week. Indeed, News Corp is a fixture of the deep state, the buried channels of political communication within the countries in which it operates. These are the grounds that breed things such as the phone hacking scandal.

The News of the World telephone hacking scandal is not new but has been doggedly pursued by the Guardian journalist, Nick Davis, for the past half-decade or more. The story of calumny, political intrigue and the over-inflated egos of media moguls, senior and junior – i.e. Mssrs. Rupert and James Murdoch – continues to have legs and may be growing in scope.

Davis provides an excellent account of the history behind the phone hacking scandal and many of the other woes facing the British press in his 2009 book, Flat Earth News. Over the past few weeks the re-igniting of the phone hacking scandal has also spread across the Atlantic, where James Murdoch, the deputy chief operating officer of News Corp and son of the company’s famous public face, Rupert, could face criminal charges in the US as well.

The fact that the events occurred at all and eventually saw the light of day is probably also due in no small measure to the fact that the UK newspaper market is more competitive and ideologically robust than anything we’d find in Canada or the US. The fact that it targeted the cellphones of the Royal Family, dead soldiers, celebraties, politicos and murdered school girls also thrust the scandal into the limelight, pissing off a broad spectrum of the powerful and popular alike as a result.

The subject has stayed at a steady boil throughout the two weeks we were in Istanbul, and a Parliamentary Inquiry in the UK is looking into these events is now under way and releasing testimony and documents pretty much as it occurs. Call this the acceleration of the political cycle and scandal laundering.

Besides destroying wealth, the scandal has put media moguls on trial. Indeed, the whole British Media System, is on trial. The British Press Complaints Council, for example, has been thoroughly discredited for its previous whitewash of widespread and systemic uses of phone hacking in 2007 and 2009. The rot runs deep and is, as they say in sociological circles, it is systemic.

The Press Complaints Commission (PCC) first report, for instance, stated categorically that “the activities . . . of two people [private investigator Glenn Mulclaire and Royal Affairs editor Clive Goodman] working for the News of the World in 2006 were deplorable, illegal and unethical”.

And the PCC kept its head stuck in the sand the next time around, in 2009, when its second report on phone hacking stated: there was “no new evidence to suggest that the practice of phone message tapping was undertaken by others beyond Goodman and Mulcaire, or evidence that News of the World executives knew about Goodman and Mulcaire’s activities.”

In other words, according to the PCC, phone hacking by News of the World journalists was the product of two bad apples: the Royal page editor Goodman and one-time petty criminal, Mulclaire. Once the ‘two bad apples’ story line was taken, the PCC stuck to it and, for all intents and purposes, abdicated its responsibilities.

The Murdochs are now trying to extend this argument by claiming that the ‘organizational complexity of modern media conglomerates’ is so Byzantine, that they cannot possibly know what is going on in every nook and cranny of the company. According to this tale, the two Murdochs – Rupert and James — were unaware of the goings on at the NOTW. This was pretty much the line that the PCC took. Others say they turned a blind-eye. The first tact injects a sense of humility into events that may now be spinning out of company and its owners’ control, while the latter looks just clumsy and neglectful. Stupid yes, but not a crime.

The scale of global media corporations like News Corp. does mean that the Murdochs cannot be, and are not, privy to every single act that takes place across its sprawling operations. Indeed, with $40 billion plus in annual revenues and interests spanning the globe, News Corp and others of its kind cannot be run on a day-to-day basis by just two people, no matter how omnipotent. However, the Murdochs have also over-played their hand on this score.

Owners do control the media they own indirectly through their control of resources (i.e. allocational control) and long-range decision-making. They sometimes also intervene directly on a day-to-day basis (i.e. operational control).

The Murdochs, in fact, are hands-on owners, in the classic mogul type, not just passive investors and dividend takers. Some former executives have stepped forward to argue that the Murdochs were complicit in, paid for, consented to and helped cover up illegal behaviour. As a result, the Murdochs’ testimony to Parliament has already been tainted and even PM Cameron as admonished them to double-check the accuracy of their testimony at last week’s Parliamentary hearings.

The idea that moguls, or at least editors’ interpretations of their interests, can set the agenda and output of a company like News Corp can be seen in the current phase of the phone hacking scandal. As a timely Project for Excellence in Journalism study released in the past week shows, Fox News has aired much, much less coverage of the phone hacking scandals as CNN and MSNBC, the two other major cable tv news outlets in the US.

Whereas CNN and MSNBC each gave about 130 minutes to the topic from July 6-8 and between the 11-15th, Fox News gave just a fifth of that amount, with only 23 minutes of airtime devoted to the subject. Coincidence, or the guiding hand of the owners and News Corp. interests in setting the editorial agenda? News Corp and the Murdochs have interests, and the flagship of their ideological enterprise in the US, Fox News, is helping to set the parameters of public knowledge and debate on the topic.

So, whether by the structure of interests or direct editorial intervention, it comes to pass that editorial policy within News Corp. is being bent to personal and political imperatives. It is just this reality that not only leads to congenital suspicions of media barons, but which have a corrosive effect on journalism as a whole.

Thus, while newspapers elsewhere flourish, and even enter something of a ‘golden age’ in Turkey, South Africa, India, China, Brazil, Indonesia and Russia, among other places, the crisis of journalism in parts of Europe, Britain and the US is being aggravated by self-inflicted wounds. The crisis may also reflect the deadhand of the media mogul – a figure that is well-past its past due date — running companies for power and personal profit, rather than standards of good journalism or corporate governance.

In sum, it is still far too early to erect the RIP epitaph over the grave of the last media mogul just yet. However, one thing is for sure and that is that the phone hacking scandal does so much portend the death of the mogul but rather reminds us of the dangers of media moguls and media concentration.

Telecom-Media-Internet Politics in Canada: Evidence, Theory & Ideology

We are at a fundamental turning point, a constitutive moment when decisions taken now will set the course of developments across the telecom-media-Internet ecology for years, maybe decades, to come. We’ve just finished one set of hearings, and two more are on the immediate horizon: the CRTC’s hearings on Usage-Based Billing that begin Monday, July 11 and its upcoming so-called ‘fact finding’ hearings on Over-the-Top/new media.

In an interesting and helpful post today, Peter Nowak argued for 7 fundamental guiding rules for telecom issues in Canada, by which he meant the full gamut of issues right across the TMI (telecom-media-internet) spectrum. They are very useful guides and starting points for discussion, and easy to remember to boot. They are:

  1. Ditch Usage-Based Billing
  2. Don’t regulate new media/over-the-top (OTT) services (e.g. Netflix)
  3. Strengthen Net Neutrality
  4. Turf Foreign Ownership Restrictions
  5. Spectrum Set Aside for New Players
  6. Don’t Regulate Cross-media market power (aka vertical integration)
  7. Plan ahead for ‘shared networks’.

I find these very useful starting points; perhaps because I agree with most of them wholeheartedly (1, 2, 3, 5). Others I’d endorse with some caveats (4). Some I would expand on greatly (7). Others I would reject completely because they lack any basis in evidence, history or theory (6).

In terms of foreign ownership, Nowak proposes to drop all of the current limits on ownership of telecoms industries in Canada. He suggests that doing this will increase ‘real competition’ in the market by adding new players. This is not an uncommon position and in my view, its goal of increasing competition is basically a good one. Michael Geist and Mark Goldberg, each in their own way, make much the same point.

There are at least three or four problems, some of which I’ve outlined in another recent post, however, with this notion of dropping foreign ownership, although I am, to repeat, not against the idea in principle. First, there’s a good chance that we could drop the rules and nobody would come. These times are not those of the high-tide of foreign investment, in case anybody has been sleeping under a rock for the past few years.

Second, even if new investment does occur, this doesn’t necessarily mean that new competitors will enter the market. It’s more likely that they’ll just take over one of the incumbents, thereby switching the ‘title’ to the underlying telecom property but not doing anything at all to increase the market, unless the new owners turn out to be better than the current ones.

This is exactly the point made by a recent report by the C.D. Howe Institute. Despite its exuberant support of the idea that all foreign ownership rules across the telecoms-media-Internet board should be dropped, the Howe report was forthright that this would probably not result in more competitors. Instead it would lead to something much woolier: “performance gains” (p. 3).

Good luck assessing that, I’d say. Like “beauty”, performance would mostly be subjective and in the eyes of the beholder. Besides, with all of the existing telecom and broadcast players clamouring for less information disclosure, less regulatory oversight and less transparency, as they did one after another during the vertical integration hearings, how could we possibly know whether this nebulous objective was achieved?

Third, Nowak’s piece is couched in the idea of being a “pragmatic” set of proposals, rather than one that dogmatically sticks to what he sees as the right or left of the political spectrum. Thus unlike the Howe Report’s suggestion to drop foreign ownership rules across the board, he argues that if an integrated telecom-media player wanted to sell to foreign investors, say a US telco like AT&T or Verizon or, just as likely, a private equity group, then Bell Media, for example, would have to sell off its television interests, e.g. CTV (and 28 specialty channels, 28 local television stations and 33 radio stations, although he doesn’t spell that out).

Quebecor would have to do the same with respect to TVA, for example, and its extensive holdings of newspapers and magazines. Rogers would do the same with CityTV, 17 specialty channels and stable of magazines, while Shaw would have to part with its assets in television (Global) and specialty channels (Corus). Fat chance that’ll happen, I’d say.

Moreover, because there is a much broader range of media involved than just telecoms and television due to the fact that the ‘big four’ vertically-integrated media companies (VIMCos) (Bell, Rogers, Shaw, Quebecor) also all have, in different combinations, extensive holdings in radio, newspapers and magazines, it’s not going to be so easy to simply hive of telecoms from television. Indeed, with newspapers and magazines swaddled in their own bundle of tax and investment incentives designed to shore up Canadian ownership, unravelling this stuff will be messy and complicated.

To my mind, this part of the proposal not might have been as fully thought through as it could have been. The C.D. Howe Institute report at least has the virtue of purity and clarity: drop the barriers on everything, telecom, broadcasting, media in general.

Fourth, a very significant problem and one that strikes deeply at whether we want to further allow our culture to be ‘securitized’ and ‘militarized’, US telecom-media-Internet companies and investment capital comes with a lot of national security baggage, particularly so in the telecoms-media-Internet space. Their operations are subject to the Patriot Act and US telecom providers and ISPs have shown a propensity to cooperate with national security agencies in a very murky zone outside the rule of law and without cover of authorized warrants in ways that subsequent courts have found illegal (here, here, here and here).

Microsoft’s acknowledgement in Britain this past week that all U.S. companies like it, whether they admit it or not, are subject to the Patriot Act, was the first real candid acknowledgement of the extra-territorial reach of U.S. national security policy when it comes to matters of the information infrastructure. As Gordon Frazer, managing director of Microsoft UK, admitted, data stored in the cloud was well within the reach of the PATRIOT Act.

The acknowledgement came in response to a question posed by ZdNet journalist, Zack Whittaker. Whittaker asked,

“Can Microsoft guarantee that EU-stored data, held in EU based datacenters, will not leave the European Economic Area under any circumstances — even under a request by the Patriot Act?”

No, Fraser explained, “Microsoft cannot provide those guarantees. Neither can any other company”.

Tying networks, servers, the Internet and everything else in Canada that runs through and on top of these facilities to US national security policy is to sell out fundamental principles regarding open media, transparency and a networked free press for the feint hope that we might achieve a modicum of more competition than we have now, and even then, not ‘real competition’, but rather the kind of newfangled Schumpeterian ‘innovation economics’ pushed by the C.D. Howe report.

But let’s move beyond the issue of foreign ownership to Nowak’s sanguine approach to vertical integration, an approach that I also find problematic. Why? Because he offers no evidence, lessons from history, or theory to support his case.

This is problematic because current evidence shows that concentration across the spectrum of telecom-media-Internet services in Canada is high, in absolute terms, and relative to comparable international standards. I offered a snapshot of this evidence in an easy-to-digest form in my Globe and Mail column last week.

I’ll repeat that here for convenience. In Canada, the ‘big 4 VIMcos’ — Bell, Shaw, Rogers, Quebecor (QMI) — account for:

  • 86 per cent of cable and satellite distribution market
  • 70 per cent of wireless revenues
  • 63 per cent of the wired telephone market
  • 54 per cent of Internet Service Provider revenues
  • 42 per cent of radio
  • 40 per cent of the television universe
  • 19 per cent of the newspaper and magazine markets
  • 61 per cent of total revenues from all of the above media sectors combined.

These numbers are not trumped up in the slightest, and in fact on the matter of the Internet and television services they are actually lower than those offered by the CRTC because of the different methodologies we use. Nowak doesn’t refute these numbers; he just doesn’t deal with them.

Theory tells us that media concentration, for which vertical integration is just one manifestation, embeds a bias for trouble in the ‘structure of the media’. Tim Wu, in the Master Switch, gets things right when he sets up the simple premise that it is important for regulators to curb the potential for companies to leverage power and resources across the three main layers of the telecom-media-Internet system: networks, content/applications and devices.

In theory, I think he is right and, based on the current and historical record, strong measures are needed to prevent companies from leveraging control over any one of these three layers — networks, content, devices — to curb competition and diversity in any other layer.

Nowak is clearly aware of the connection in this regard and he hopes that his first and second principles — ditching UBB and leaving ‘new media’/OTT untouched by regulators — will take care of vertical integration problems by removing the ability of Bell, QMI, Rogers and Shaw from using bandwidth caps and the pay-per Internet model to basically undermine the viability of rival online video distribution services (AppleTV, GoogleTV, Netflix, etc.) that they see as a threat to their own broadcast services. I think that these are important steps, but insufficient to deal with the full range of ways in which leverage across the three layers of the telecom-media-Internet system can be used to hogtie competitors and stifle the fullest range of voices and expression possible.

This is not just hypothetical potential, either, but rather documented by case after case of examples where either access to content or to networks is deployed in the strategic rivalry between less than a handful of players in oligopolistic markets. And when highly capitalized Netcos such as Bell own much smaller content companies like CTV, they have every incentive to use the latter to shore up the position of the former.

The recently completed vertical integration hearings at the CRTC were replete with example after example of this, from network companies such as Telus, SaskTel, MTS Allstream and Public Mobile as well as media content companies, whether the CBC or smaller production companies like Stornoway Productions.

These examples are not just limited to Canada either, but global in scope. They are behind the recent detailed regulatory framework put into place in the US by the FCC and Department of Justice that blessed the merger between Comcast and NBC-Universal, but not before taking comparatively stern steps, especially by Canadian standards, to ensure that NBC-Universal content could not be locked up or used by Comcast to the disadvantage of rivals in the broadcasting business. Furthermore, Comcast was also required to make its television and film content available to Internet competitors and ‘online video distributors’ (OVDs), a new category designed to cover services such as Netflix, Hulu, AppleTV, and so on, and to adhere to open Internet requirements generally.

Other countries such as Australia, Belgium, Britain and New Zealand have dealt with their own experience of networks being used to trample competition and diminish the range of voices and expression possible by going even further to set up rival ‘unbundled’ open networks (Australia) or by mandating ‘structural separation’ between incumbents’ networks (layer 1) and other layers (services, content, devices) in the system. In an important post yesterday, Bill St. Arnaud also talks about the development of networks that are essentially based on pick and choose access to capabilities and functionalities that respond flexibly and recursively to  user generated communication and information needs

The problem, thus, is one that is buttressed by evidence, by theory and by global experience. In light of this, robust measures rather than a sanguine approach to vertical integration is most definitely needed.

And to bring this to a close, the issues raised by vertical integration are not the consequence of innovative, new industrial arrangements or newfangled theory, but rather deeply entrenched historically and indeed endemic to situations where those who control the medium (networks) are also in a position to control the messages (content) flowing through those networks.

Thus, in the first decade of the 20th century in Canada, the Canadian Pacific Telegraph Co. and Great North Western Telegraph Co (the latter under ownership control of Western Union) had exclusive distribution rights for the Associated Press news services in Canada. As part and parcel of the telegraph companies’ bid to buttress their dominance in the highly lucrative telegraph business against a couple of smaller rival upstarts (the Dominion Telegraph Co in Canada and Postal Telegraph Co. in the US), the Canadian Pacific Tel. Co. and Western Union-backed Great North Western Tel. Co. offered one of their premier set of clients — newspapers across the country — access to the AP news service at a very cheap rate. In fact, they gave it away “free”. Sound familiar? (observant readers might also note the persistent recurrence of ‘network infrastructure duopolies’, too)

The AP news service was so cheap because instead of paying the cost for both the news service and the telegraph charges for delivering it from one place to another, Canadian Pacific Tel. Co. and Great North Western Tel Co only charged newspaper subscribers the ‘transmission costs’ for the AP service. The content, under such arrangements, was ‘free’. Of course, this was a real boon to established members of the press and to AP, while it also helped to stitch up the companies’ lock on the telegraph business.  It was a menace to rival news services and a competitive press or telegraph system, however.

The fly-in-the-ointment was that any competitor news service was at a huge disadvantage because its subscribers had to pay the ‘transmission costs’ plus the cost of the news service. Thus, when Winnipeg-based upstart, the Western Associated Press, tried to set up a rival Canadian news service to that of the Associated Press in 1907, it found it’s opportunities blocked at every step of the way because there was simply no way its subscribers could pay two costs — transmission and for the news service — while the AP service was essentially given away free after subscribing newspapers paid the telegraph companies their fees for distribution.

As one muckraking journalist W. F. Maclean wrote in the Toronto World,

“attempts on the part of public service companies [the telegraph companies] to muzzle free expression of opinion by whitholding privileges that are of general right cannot be too strongly condemned.”

The matter found its way before one of the long-lost predecessors to today’s CRTC, and one of the first regulatory bodies in the country, the Board of Railway Commissioners. Canadian Pacific Tel. Co. came out swinging, arguing that the BRC simply had no authority over the news services or to compel it to separate the costs of the news services from transmission costs.

Times were different then, it seems, and the BRC didn’t wilt one bit amidst the hot-heated rhetoric but blasted back that it was compelled by  law to insure that rates were “just and reasonable” and that unless transmission rates were separate, explicit and equitable “telegraph companies could put out of business every newsgathering agency that dared to enter the field of competition with them” (BRC, 1910, p. 275).

The upshot was separation of control over the wires from control over the news business. The regulator had all the authority in the world it needed to break up the ‘double headed news monopoly’.  It is a lesson that the CRTC and everybody else interested in ensuring that we oversee the creation of the most open media with the maximum range of voices and creative expression possible should pay close attention to.

Of course, the modalities of communication have changed tremendously and we now live in age of information abundance rather than scarcity, but as Tim Wu’s Master Switch and the mounting evidence before our very eyes attests, the basic logic of leveraging content and networks to confer advantages on one’s own operations whilst driving others into submission, if not out of business altogether, is alive and well.

This is a basic and easy-to-grasp point, and until we firmly implant it at the heart of the structure and regulation of the telecom-media-Internet system, we will continue to forgo the economic, political, cultural and personal benefits of the most open network media system possible and which further the goals and values that define a free and democratic society.

On that score, Nowak is right, these are not ‘left’ and ‘right’ issues. They are issues, principles and values of concern to all who take the precepts of liberal capitalist democracy seriously and who see in the status quo a condition that is badly lacking by even that non-ideological/utopian standard.

Source:

Board of Railway Commissioners (BRC). (1910). The Western Associated Press v. The Canadian Pacific Railway Company’s Telegraph and the Great Northwestern Telegraph Company of Canada. In Sessional papers of the Parliament of Canada. Ottawa: J. De Labroquerie Tache, Printers to the King’s Most Excellent Majesty.

Big, Brash & Bold: Drop all Telecom-Media Foreign Ownership Limits

A new report by the CD Howe Institute came out today. It’s not big, just 3 pages and seemingly informed by a bunch of guys sitting around a table at the Howe’s ‘inaugural meeting’ last week (June 17).

It is brash, and some might dress it up as bold: drop all limits on ownership of telecoms and media industries in Canada, it says. Full stop.

No phase out. No ‘newcomer advantages’, full stop again. No attempt to separate the ‘medium’ (wires, spectrum, sewer access) and the message (broadcasting, integrated suite of ‘content’ from mags to blogs) from one another. A digital free for all, you might say.

Perhaps the gentlemen, and they were with the exception of only a single woman, thought this might be a good idea while they sat around and chatted last Friday afternoon. Apparently, there were not so many women ‘law & economics’ types available to join them, given that all but out of the 16 places apparently went to the guys and boys from Bell (see below). I guess ‘law and economics’ types like Sheridan Scott, a hard liner in these matters, and Monica Auer, who generally takes the opposite tack by speaking eloquently and passionately on the telecom and media workers’ behalf, weren’t available, or any of the other smart dames roaming these circles as I saw, in the minority, at the CRTC’s hearings this week.

I looked at the composition of ‘the deciders’ not just because their gender was so obviously skewed, but because I recognized the names of most of the guys. One in particular leapt out, Jeffrey Church, a University of Calgary economics professor. By all accounts, he’s an excellent teacher. Professor Church caught my eye because, in addition to advising the ‘big 3Ps’ in Canada as I’ll call them — Petroleum, Alberta Beef Producers, Pharma — Professor Church just wrote an economic analysis for Bell as part of the very, very important vertically-integrated telecom-media-Internet hearings now being held by the CRTC.

According to Church in his voluminous 93 page submission on Bell’s behalf, vertical integration is good for consumers and for Canada (p.5). I disagree, strongly, for reasons set out regularly in this blog (e.g. here) and my column for the Globe and Mail on Monday.

It’s not just Church that is so closely tied to Bell, but also Marcel Boyer, Bell Canada Professor Emeritus of Industrial Economics, Université de Montréal, as the CD Howe report indicates on the back of this slim 3 page ‘report’. 2 out of 16 does not a majority make, obviously, but their presence does stand out.

The rest of the lot in this ‘law and economics’ crowd does not seem very adventuresome, either. I know one professor occupying a BCE endowed chair that won’t be called upon, Professor Robert E. Babe at the University of Western Ontario, for he has traced the propensity of telecoms historically to go from limited competition to ‘total consolidation’ on a regular basis.  Let us say that the fact that Howe ‘report’ has zero to say about such notions is not all that surprising.

The 3 page ‘report’ is candid that dropping the foreign ownership limits on everything – telecom, media, internet — will not increase the number of competitors in the market. As it states, “given the small size of the Canadian market, the consensus view saw no major change in the number of national competitors”.

Translation, the big three companies in wireless telecoms — Bell, Rogers, Telus — for instance will still account for about 94% of the market (according to CWTA 2010), but they might be owned by yet a larger foreign based telco (Vertizon, the ‘new’ AT&T, Deutsche Telekom, etc.) or may private equity funds. Me, I have doubts many foreign investors — telcos, priv equity funds, banks — will even come if permitted to do so (or if we want ‘em to on such ‘carte blanche’ terms). I’m not alone on this, and hardly radical, given that even the World Bank states that the keys to effective foreign ownership is a ‘strong state’ able to regulate and competition.

Instead, the Council of 15 wise men and 1 smart woman says, drawing on newfangled theory about ‘competitive innovation’ drawn from the right-wing side of Schumpeterian ‘innovation economics’, that “the gains from liberalization would likely result . . . from better performance by telecommunications market participants”. Umm, I hope so, especially because its this same crowd breying for the withdrawal of any meaningful conception of regulation or state intervention. The CRTC’s horizons have been blinkered and public ventures like CANARIE have had their wings clipped. How foreign capital will ‘improve’ performance standards in Canada is not clear to me/self-evident.

The report advocates this ‘regulatory shock and awe’ to be developed in one swell swoop, with no distinctions kept between telecoms and broadcasting, between networks and content, between incumbents and newcomers. The telecom-media-Internet sectors are now so entangled on account of digitization and how people use media that they must be treated together as a whole. Partial agreement there about treating things ‘holistically’.

More targetted measures are suggested as alternative to foreign ownership for whatever “cultural policies” might be left over. Some of these ‘targetted measures’ I believe in — securing financing for content production, shelf space, strong CBC — and they have been promoted by at least two of the same writers involved in today’s 3 page missive (e.g. see Hunter and Iacobucci, with a third author Michael J. Trebilcock).

There are several problems with this “report”, however, that make it’s contribution to public discussion dubious, despite the fact that it will gain much attention.

1. Three pages is not a report and should not be pitched as one.

2. The Council of the Wise is skewed along lines suggested above, ie. by Bell and by Gender. Bell has always had a visible hand in the telecom, broadcasting and media industries, indeed, since it began broadcasting speeches, songs and sermons in the 1880s and took-over the Chairmanship of the 1905 Mulock Commission which had originally been convened to look into the underdevelopment of the telephone system in Canada in the early days of the 20th century.

So, that Bell continues to be front and centre 100 years later, at the dawn of the 21st century, is both a marker of continuity and somewhat unsurprising, but equally suspect/problematic in each of these occasions. The presence of Bell’s hired gun (Church), a Bell sponsored ‘academic chair’ (emeritus, Boyer), and BCE CEO George Cope’s speech at the C.D. Howe two months ago all so bunched up in time and common stance has a whiff of something not quite right about it.

3. While I don’t actually have many problems with increasing competition and dissolving lines between the medium and the message, or the network infrastructure and content, we also need to be upfront about the fact that the former (media infrastructure) are generally scarce and the latter (messages) abundant. In today’s OECD Communication Outlook 2011, it is clear that, generally speaking, the top 2 ‘netcos’ in each of the OECD countries account for between two-thirds and three quarters of fixed and mobile telecom network markets in each of the OECD countries (pp. 56-59). This means:

  • that Netcos generally should be regulated for market power, ‘messagcos’ generally not.
  • ties between Netcos and Messagcos are congenitally fraught with problems and propensity for anti-competitive behaviour.
  • Free speech standards and the values of a ‘networked free press‘ are also at play (and here). As the United Nation’s Human Rights Council recently stated, those standards apply to the Internet and people should have, as Article 19 of the Universal Declaration of the Rights stated before it in 1948, the freedom to receive and impart any information, through any media regardless of frontiers. At the CRTC Hearings on vertical integration the other day, Bell’s Mirko Bibic and Shaw’s brass called the idea that people should have access to any content on any device “preposterous”. The C.D. Howe ‘report’ is oblivious to these considerations.

4. The C.D. Howe report misses reality and the ‘big picture’. Perhaps this is because there is not a whiff of heterodox thinking among the ‘law & economics’ experts who wrote it. Not one ‘ecclectic’ economists, not one wild eyed, crazy lawyer, not a communication and media scholars or a historian in sight.

This is too bad because as long as it continues to be the case, people will continue to talk past one another. And it also means that ‘reports’ like this one, and the policies and approaches that actually do follow close in tow in the ‘real world’, will lack legitimacy.

5. Without being able to expand their horizon, the authors of the C.D. Howe ‘report’ blithely countenance “North American integration”. Economically, as I said above, I don’t have a particular problem with that, although I doubt that things will pan out as they expect, and even that what the Howe folks do expect ain’t much (“better performance” from same number of players).

Politically and culturally, however, there is a problem, not with Cancon and ‘traditionalist/romanticist’ conceptions of culture, but ‘network culture’. Netcos and search engines are now closely allied with state security, military strategy and defense contractors.  It’s probably best to keep some clear blue water between these domains. The authors give no hint that they have even thought of this.

Netcos, ISPs, search engines, etc. are also constantly being badgered by lobbyists as well as politicians in Canada and the U.S. to play a greater role on behalf of  media and entertainment industries (for most recent and strong opposition to this from within just the mainstream’, see here). The approaches have differed, with the last government in Canada wisely turning down lobbyists push to have ISPs play the role of ‘copyright cop’, disconnecting people who repeatedly are identified as ‘copyright bandits’.

The International Federation of Phonographic Industries (IFPI) launched it’s efforts to lean hard on ISPs and search engines, and less on Digital Rights Management (DRM), in 2008. It has been picking off ‘wins’ for this agenda around the world, but not so much yet in Canada.

Yesterday, CNet journalist Greg Sandoval reported that AT&T, Comcast, and Verizon “are closer than ever to striking a deal with media and entertainment companies that would call for them to establish new and tougher punishments for customers who refuse to stop using their networks to pirate films, music and other intellectual property”.  That turn-of-heart, in turn, he reports, was eased by coaxing from the Obama Administration and the National Cable TV Association.

The pressure is already strong in Canada, but so far government and regulators have refused to make ISPs the deputies of the media and entertainment industries or to regulate the Internet as a broadcast distribution medium. On law and order, however, the push is for a stronger state and more compliant Netcos and Searchcos.

While there’s lots of dots to connect between all of these latter points, the key idea is that integration at the network and market levels is going to increase pressure to harmonize tougher matters that impinge greatly on network media, and thus network culture. That the blokes and one women from C.D. Howe have nary a word about this and don’t dare let the phrases ‘network neutrality’ and ‘open media’ cross their lips is a problem of the first order because those concerns, as sure as night follows day, are at the heart of the emergent network media culture. How can foreign ownership be reconciled with these concerns should be the question, rather than if it if good or bad altogether.

In sum, until we can start speaking one another’s language and stop passing off economic and policy platitudes backed by those with big stakes in the game, the nominal ideas presented in this “report” should be shelved and other big questions — vertical integration, for example — put on hold.

Ultimately, Pork, Petroleum and Pharma are not the same as telecoms and media. We need some new thinking for ‘new media’.

Until we recognize this, we’re not going to get very far, at least in a a way that takes into account the full range of issues at hand, rather than the economists narrow measuring rod of value.

Global Internet Regulation: Tightening the Screws?

Last week in the run-up to the G8 leaders meeting in France, French President Nicolas Sarkozy convened a conference among prominent media and Internet types. The goal: how to ‘civilize’ the Internet.

As Sarkozy said,

The internet is the new frontier, a territory to conquer. But it cannot be a Wild West. It cannot be a lawless place, where people are allowed to pillage artistic works with no limits.

And you know what, he’s right. The Internet should not be a lawless frontier disconnected from the real world, and it is not. It is already deeply shaped by the same legal, political, economic and social forces that govern our actions daily.

That said, the crux of the approach being advocated by Sarkozy, and perhaps to come out in a communique at the end of the G8 meetings, is that Internet Service Providers, search engines and others are being ‘deputized’ to act on behalf of law enforcement officials and vested interests in the entertainment and ‘copyright industries’ (see the New York Times story as well). That is, they are being turned into adjuncts of both the state and vested interests to deal with matters that are, some more than others, sordid ones indeed: child pornography, money laundering, counterfeit goods and software and, of course (and in some instances) large-scale enabling of copyright infringement.

Of course, I’m the last to stand in support of child porn, money laundering, industrial scale piracy, and so forth. However, I am opposed to the full-court press that is now coming from three directions that aim to turn ISPs and search engines from being ‘gateways’ to the Internet to ‘gatekeepers’.

First, and largely since 2008, ISPs have come under a full-court press by the Recording Industry Association of America and the International Federation of Phonographic Industries (IFPI) to adopt a notice and take-down procedure. In this situation, once notified of allegations of copyright infringements, ISPs would block Internet users access to such content and, in some cases, cut off repeat offenders. Search engines would essentially make such content disappear by turning up a blank when suspect sites were queried.

The problem with this is already well-known: the gap between what is allegedly an infringement and what the law in each country actually determines to be so is big indeed. What typically happens is that private contractors using automated ‘notice and take-down’ systems take a shotgun approach, capturing much that is on the side of right in the process.

People caught in the cross-hairs have a steep hill to climb to prove their innocence. That is wrong because it turns presumptions of innocence on their head. Here’s a link to the Electronic Frontier Foundations “Takedown Hall of Shame” to get a sense of how overly-broad notices also curtail freedom of expression.

Second, Digital Rights Management (DRM) technologies began to go out of favour in the last few years, but as they were being abandoned, after 2008 the RIAA and its international counterparts were signing new memoranda of understanding with ISPs that enrolled the latter in the effort to combat piracy. The RIAA and IFPI have also pushed hard for national laws to accomplish the same ends. In other words, the RIAA is using technology, States and Markets to accomplish its goal of clamping down on content.

Sarkozy and the French Government were early and enthusiastic endorsers of such efforts and the three strikes law in France is considered by most to be particularly draconian. The IFPI has also chalked up several wins for such measures in other countries as well, including Sweden, South Korea, Taiwan and the UK, among a few others (see pp. 25-27).

Now, however, and at least in Britain such measures are under severe challenge in the courts by way of initiatives launched by two of Britain’s biggest ISPs, BT and TalkTalk, and in the court of public opinion, where they are losing badly. Yet, just as such measures come under severe criticism and challenge in some countries, they are being expanded in others.
Cont’d on Page 2 . . . . . . . .

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The Harper Majority, Telecoms Foreign Ownership and Canada as Digital Free Media Haven

Canadians are all a tizzy about what the Harper majority might mean across a whole range of things. There’s a panopoly of issues within the communication and media realm that might be up for quick action: foreign ownership rules, the re-tabling of copyright legislation, the potential regulation of Online Video Providers (OVPs), and the possibility to turn back the tide that his now transforming the Internet in Canada into a pay-per model governed by the incumbent’s ‘business models’, bandwidth caps and UBB.

For now, I want to focus on the first issue: the telecoms foreign ownership rules and the potential that any changes taken in that regard might be harnessed to a bigger project, namely turning Canada in a digital, ‘free media haven’ governed by the highest standards of the networked free press possible (see here and here, as well).

A version of what follows was published in my column for the online version of the Globe & Mail today, so here I will expand on a few of the issues and add a few links, as I usually do.

The Conservatives are well-known for wanting to liberalize the current rules. Academics and consultants such as Michael Geist and Mark Goldberg have also called for greater foreign investment in Canadian telecoms. Most banking analysts feel the same way.

Konrad von Finckenstein, CRTC chief, is also in favour, but frets about how to deal with the slew of integrated telecom-media behemoths that he has recently blessed: Bell Media, Roger Media, Quebecor, Cogeco, Shaw, (but not Telus). In other words, how to open the gates for more foreign investment in telecoms but not broadcasting?

Those in favour of changing the existing rules believe that doing so could usher in more investment in network development, more competition, less bandwidth throttling and far greater consumer choice. The current incumbents who dominate the telecoms, media and Internet markets in Canada would, so many appear to believe, be forced to compete head-on with the big global players – AT&T, France Telecom, T-Mobile, Japan’s NTT, China Telecom – for customers.

The goals are laudable, but are they realistic?

Some suggest that movement on the issue will be slow because the Tories do not have a clear strategy to deal with it. Yet, the Government has had several options on the table since 2006:

  • 1. removing all foreign investment limits;
  • 2. raising the limits from the current twenty percent to just under half;
  • 3. permitting foreign investment only in new companies that have less than 10 percent market share.

The only strategy the Government doesn’t have is keeping the status quo. Expect change soon.

The Government’s Cabinet Directive in 2006 instructing the CRTC to rely on market forces to the maximum extent feasible also tips its hand. Indeed, the Government tried to do an end run around the law through another Cabinet Directive overturning the CRTC’s decision to reject Globalive’s (Wind Mobile) bid to become a new wireless player on the grounds that it was not Canadian owned and controlled, as the Telecommunications Act (sec. 16) demands.

A Federal Court in February stopped that effort in its tracks. At least a formal change to the Telecommunications Act’s foreign ownership rules would have the virtue of bringing the law into conformity with the facts on the ground, i.e. Wind Mobile is up and running.

Even if we assume that allowing greater foreign ownership is a good thing, and I will offer a few more reasons below as to why it could be, many pesky issues remain. For example, what if the Government decides to just go with option #1: Allowing greater access to foreign capital markets for new comers?

The intended beneficiaries, of course, are Wind Mobile, Mobilicity and Public Mobile, but would it also apply to Quebecor, a company that is a newcomer to wireless but well-entrenched across the rest of the media? Somehow that doesn’t seem right.

That raises the larger issue about how to disentangle telecoms from broadcasting? The fact that telecoms and broadcasting are becoming more intertwined is becoming clearer by the day as Netflix gains a stronger footing in Canada and as Google and Apple appear routinely before the CRTC and Parliamentary Standing Committee on Canadian Heritage.

Indeed, when the Americans negotiated the NAFTA and WTO deals they anticipated that digitization would soon dissolve the boundaries between telecoms and broadcasting and bring the ‘cultural industries’ within the reach of the ‘global trade regime’ as a result of ‘technological forces’. MIT scholar Ithiel de Sola Pool argued much the same thing in his 1983 classic, Technologies of Freedom, many years earlier.

Yet we also need to ask if loosening the rules will lead to the outcomes that so many expect? AOL, AT&T and PSiNet were important players in telecoms and the Internet in this country during the dot.com era, but where are they now?

They have long since retreated, collapsed or gone bankrupt. The point being that this is not the rah-rah days of globalization in the late 1990s, but one when foreign investment in telecoms is at a low ebb.

Just as the “old” AT&T was retreating from Canada, it was also selling off a slew of networks across Latin America in the mid-2000s – mostly to Mexico-based TelMex. The trend continues.

Just last month, Deutsche Telekom sold its T-Mobile wireless operator in the U.S. to the resurrected ‘new’ AT&T. Pundits can believe all they want that AT&T, France Telecoms, Deutsche Telekom, NTT, and so on are lining up to enter Canada, but evidence suggests otherwise.

The lesson from T-Mobile is that foreign capital investment is hunkering down rather than trying to conquer the world. As two World Investment Reports from UNCTAD in 2008 and 2010 observe foreign investment and cross-border mergers & acquisitions in telecoms have fallen considerably from their late-1990s peak throughout the decade, and have yet to recover, especially after the ‘crisis of 2008’.

The sale of T-Mobile also reveals that even the massive U.S. wireless market is unable to sustain robust competition. Three players dominate the U.S. wireless market: AT&T, Verizon and a smaller Sprint/Nextel.

In other words, foreign ownership is no sure-shot solution for concentrated telecom, media and Internet markets. In fact, the World Bank’s message since the early 1990s, amongst others, is that foreign capital investment in telecoms only delivers the good when it is properly regulated and used to launch new rivals, rather than to acquire incumbents (i.e. ‘greenfield investment’).

None of this is to say that we should avoid more foreign investment in telecoms. In fact, the history of telecoms in Canada has been bound up with foreign capital since the first telegraph lines linked Toronto to Buffalo and New York in 1846 and the trans-Atlantic cables created a vast Euro-American space of capital, markets, migration and information with Canada at the hub in the 1860s and 1870s.

Today, greater foreign investment could not only be used to increase the availability and use of broadband telecom and Internet services and foster more competition, but as a stepping stone to far-reaching efforts to transform Canada into an open ‘digital media haven’.

New rules would provide an incentive for greater foreign investment, while our cool climate could entice Amazon, Google, Rackspace, Microsoft and others to build their massive ‘data warehouses’ on Canadian soil because it is cheaper to run these energy hungry facilities here than in the United States. Our stronger protections for personal information could put vast stores of data beyond the reach of the U.S. Patriot Act and keep the ‘domain name snatching’ operations of Homeland Security at bay.

Birgitta Jonsdottir, the Icelandic Member of Parliament, has similarly proposed to make her country a haven for “digital free speech” – similar to what the Cayman Islands is for banking, but with the higher purpose of advancing human rights, democracy and freedom of expression. Seen from this angle, relaxing foreign ownership rules in Canada could serve as the cornerstone of efforts to foster an open telecom, media and Internet system governed by the highest standards of a networked free press in the world (also see here).

For that to happen, however, the new majority Harper Government will have to embrace openness, freedom of speech and democracy just as firmly as it now has its hands on the levers of the state.

Politics, the Press and Bad News for Democracy: Newspaper Endorsements Update on Last Day Before Election

For the last three days we’ve been playing the politics and the press game, counting up the editorial endorsements for Prime Minister made by the major daily newspapers across the country.

I’ve been focusing on 61 daily newspapers that belong to one of the nine main newspaper ownership groups in Canada that account for roughly 95 percent of the newspaper industry revenues. Today I added another newspaper to the list, the Winnipeg Free Press.

This means that we now can speak of the 10 largest newspaper groups in Canada. Our “sample” in other words now accounts for roughly 97 percent of the newspaper business in Canada.

The basic idea behind the free press is that it is suppose to reflect a plurality of a society’s voices and political forces. If that is true, shouldn’t the range of editorial opinion in the press come at least somewhat close to matching up with public opinion?

The news that I’ve delivered so far has not been good. On day one, I showed that out of the four editorial endorsements made by that time — one by the Globe and Mail and three others by members of the Post Media Group (National PostTimes Colonist and the The Province) — all picked Harper as their man. By yesterday, the number of endorsements had grown to 13, with 12 plunking down foursquare behind Harper.

In other words, despite only having support of roughly a third of Canadian citizens, 92% of editorial opinion in the press in Canada were stumping for Harper. Something was definitely out of whack, but perhaps there was hope because conceivably the remaining papers could come along to save the day, singing the praises of Ignatieff, Layton, Duceppe, or May in some way that roughly corresponded with the distribution of votes and voices in Canada.

Sorry, that hasn’t happened. For those hoping that somehow the editorial pages might finally line up with popular sensibilities and the disparate political forces that make up the fabric and culture of democracy in Canada, the bad news is now really bad news.

By today, Sunday before the election, the number of endorsements has leapt to 31. If the ‘editorial voices’ of Canada’s main daily newspapers roughly corresponded to people’s views based on a mixture of current opinion polls and the last election, then we would expect something like, give or take a few, 10 to 12 endorsements for the CPC and Harper, just under a quarter to line up behind either Layton and the NDP or Ignatieff and the Liberals, and the remainder to be split across the Greens and Bloc.

So, where do things now stand? The table below shows the results

Parent Group & Titles Mrkt. Share ($ 2009) Dailies / Group CPC Lib. NDP Just Vote/ Multiple Parties
Post Media 27% 12 10 1
Sun Media 25.9 18 6 3
Toronto Star 13.9 1 1
Globe & Mail 7.2 1 1
Power Corp/ Gesca 9.8 7 3
Winnipeg Free Press 1 3.5 1
Transcontl. Media 3.2 11 1 2
Glacial 2.9 6 1
Halifax Herald 2.2 1 1
Brunswick News 2.1 4 1
10 Groups Total Tally  62 Titles 97.5% Market Share 21  0 1 10

Layton luckily picked up an endorsement from the Toronto Star. He and the NDP also got some mixed blessings among the papers of the La Presse group — which stands out as the most representative among the papers across the country, with papers in its group such as La Presse, Le Soleil and Le Droit backing a mix of candidates from all of the parties.

Counting just the endorsements of specific candidates for PM (Harper, Layton, Ignatieff, Duceppe, May), we find a stunning 21 out of 22 backing Harper. In other words, 95 percent of editorial opinion has solidified behind Harper. This is almost three times his standing in the public mind, and the last election.

The newspapers aligned with the Sun Media Group (Quebecor Media Inc, or QMI) and the re-incarnated Post Media Group have engaged in ‘bloc endorsements’. That they have done so is an indictment of editors who have sold their souls, shilling for owners one by one right across the country rather than exercising any editorial autonomy and freedom of their own minds. Instead, they take their marching orders from Montreal and Toronto. Readers deserve better.

This is also an indictment of the heavily concentrated nature of the newspaper and media business in Canada, with just two entities — QMI and Post Media — accounting for over half of the newspaper industry.

To be sure, their grip is not iron clad, and within both groups a few smaller papers like QMI’s Barrie Examiner, The Brockville Recorder and Times and The St. Catharines Standard as well as the Post Media’s Regina Leader-Post, appear to have been not quite so willing to swallow their master’s line. Instead, each of these small town papers has chosen to write ‘get out and vote for somebody’, civic-duty editorials. More than half of the small city newspapers in places like Nainamo, Sault St. Marie, Kenora, Dawson Creek, and so on offered no editorial endorsements at all.

The editorials of the small city papers listed above and others like them are so important because at least they express an independent local editorial voice, and are more varied than unison of voices that have been strung through most of the big city papers.

But make no mistake that these are minor papers in the QMI and Post Media stables. In Vancouver, Calgary, Edmonton, Saskatoon, Toronto, Montreal (but not Halifax and much of the Maritimes) and other major cities right across the country where these groups have dailies, editors are stumping for Harper. Even single major newspapers such at the Globe and Mail and the Winnipeg Free Press have weighed in strongly on the CPC side of the scale in Canada’s biggest cities and nation-wide.

This is not a free press. This is bad for democracy. The fact that a shackled press now stands to an extraordinary degree singing their praises for Dear Leader S. Harper from the same hymn sheet should give us pause for thought and reflection.

Even though I think that this is a problem of the highest order, let me close with three caveats that I think might lead us to a somewhat happier place:

First, opinions pronounced from the bully pulpit of the editorial page on behalf of media owners comes across as much more of phalanx of congealed opinion than the rest of the pages of the press. In other words, the solidity of editorial opinion is not matched to the same degree by journalistic opinion which, while still constrained, is of a broader range.

Second, journalists, and maybe even editors, are people too. The Globe and Mail, to its credit, seems to be doing some soul searching around these issues. Yesterday it published an exceptionally strong condemnation of its own editorial endorsement by Concordia University journalism professor Matthew Hays.

Today, it has also opened up the pages as well to deeper reflections from readers, while acknowledging the dominantly negative response to its choice. Despite looking like the press of a banana republic from some angles, the editorial pages at the overwhelming majority of Canada’s newspapers that are now serving as the mouthpiece of the CPC — Conservative Party of Canada — are not the same as the Xinhua News Agency and the Communist Party of China.

Third, the fact that editorial opinion is so out-of-step with popular opinion reveals the tenacity and autonomy of the public mind. Our minds are not blank slates upon which editors stamp their views.  That, however, does not excuse the gap one wit, but rather should make us wonder what a real free press would look like, one that actually did simultaneously draw from the public well while also contributing to it.

Tomorrow’s a big day. Let’s change things around so that we can address some of the bigger issues at hand, including some of those relayed here in the past three days.

Oh yes, for the super-duper, updated paper-by-paper breakdown of each newspaper’s editorial stance (with links to the editorial), please see Editorial endorsements Updated (May 1).

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