The ITU and the Real Threats to the Internet, Part IV: the Triumph of State Security and Proposed Changes to the ITRs

This is the fourth in a series of posts on the potential implications of proposed changes and additions to the ITU’s international telecommunications regulations (ITRs) on the internet (earlier posts are here, here and here).

As we assess these potential implications it is necessary to sort out charges that are, in my view, overblown and alarmist versus those that have merit based on a close reading of the relevant ITU texts. I want to be clear that while I think that many of the charges being leveled at the ITU are trumped up baloney, there are actually many reasons to be concerned. I’ll briefly reprise what I see as the over blown claims (OBCs), then set out the most important real areas of concern.

Over Blown Claims (OBC)

(OBC1): The ITU & the Net: The claim that new rules being proposed for the WCIT this December could give the ITU authority over the internet, when currently it has none, is one OBC (see here, here and here), as I laid out in blog post two.

(OBC2) The Global Internet Tax: This is the claim that some countries want to meter internet traffic at their borders, a kind of tax that Facebook, Google, Apple, Netflix and other internet content companies would supposedly be forced to pay to reach users on the other side of the toll – simultaneously serving to fund broadband internet upgrades in foreign countries, constricting the free flow of info, and keeping people sealed off behind the closed and controlled Web 3.0 national internet spaces that are being built in Russia, China, Saudi Arabia, Iran and other repressive states (see here and here).

The kernal of truth in this matter is that European telecom operators have proposed to establish a “fee-for-carriage” model – like cable tv – that would allow them to charge big internet content companies according to the volume of traffic they generate. I don’t like it at all. It is a full-scale assault on network neutrality. Google hates it too (Ryan & Glick, Cerf NYT, Cerf Congress). Net neutrality folks should be up in arms, and some are.

The problem at the root of the critics’ assertions, however, is that the proposal by ETNO is not unusual but embodies the same “fee-for-carriage” model that telecom carriers such as AT&T, Comcast, Bell, Telecom NZ, and others have pursued for the past decade (see post 3). It is wrong to construe the demand to make internet companies pay for carriage as a tax, let alone a diabolical scheme by authoritarian governments to take-over the internet.

In addition, the idea of an internet metered at the border overlooks possible additions to Art. 3.7 of the ITRs that, as discussed in the last post, “enabl[e] direct international internet connections” between countries. “Special Arrangements” set out in Art. 9 of the constitution also means that telecom and internet companies can strike whatever deals they want to create end-to-end connectivity, so long as both countries on either end agree. Again, markets and contracts rule, not some kind of cyber-wall of Berlin.

(OBC3) Spam, Spam, Spam: The third, mostly bogus claim is that proposals to add references to spam in several places in the ITRs are the thin edge of a wedge that could lead to internet content regulation (Article 2.13; Art. 4.3a; and proposed new Art. 8A.5 and 8B). The proposal, however, urges countries to adopt “national legislation” covering spam – as many already do – and “to cooperate to take actions to counter spam” and “to exchange information on national findings/actions to counter spam”. This hardly seems like the thin of a wedge and, moreover, Article 2.13 explicitly excludes content as well as “meaningful . . . information of any type”.

Still, the U.S. is strongly opposed to such measures on the grounds that technological solutions are better suited to the problem than international law. Overkill, it says, and at odds with technological neutrality. Australia calls it too broad, Canada doesn’t like it either, and Portugal is still looking to see how it meshes with EU law. This is hardly an endorsement for the ‘global regulation of spam’ by the supposed axis of internet evil offering it, but the proposal is hardly tantamount to Armageddon, either (for annotated notes outlining countries’ views of proposed changes and additions, see here).

State Security, Splinternet and the Pending Death of the Open Global Internet: the Real Threats to the Internet

Now if you think I’m simply lining up as an apologist for the ITU, you’d be wrong, as the rest of this post makes clear.  Several proposals now on the table (see below) would cast a devastating blow to the internet by blessing the efforts of individual countries to build their own closed and controlled national Web 3.0 internet spaces today. In fact, many countries, including Anglo-European countries, are doing just that, although to a degree and of a kind that is demonstrably different than what is being built in the list of ‘rogue states’ that are often identified with such projects: Russia, China, Saudi Arabia, Iran, etc.

In fact, several sections of the ITU’s current framework already allow these kinds of projects, before any changes. Proposals to change or add new elements to the ITRs could make matters even worse, however.

Intercepting, Suspending and Blocking the Flow of Information since the 1850s: the Dark Side of the ITU

To see how, we need only to realize that nation-states have always claimed unbridled power to control national communication spaces, and to intercept, suspend and block the cross-border flow of information. The authority to inspect, suspend and cut-off communications that “appear dangerous to the security of the State or contrary to its laws, to public order or to decency” was first asserted by European governments in the 1850s during their drive to squelch popular rebellions. That authority was acknowledged by the Austro-German Telegraph Union and Western European Telegraph Union at the time, before being folded into the ITU when these organizations merged in 1865 (see Constitution, Article 34). That legacy hangs over the current WCIT talks like a dark cloud.

The supremacy of national security has been retained ever since and forms the basis of Articles 34, 35 and 37 in the ITU’s current Constitution, as the extracts below illustrate:

“Member States reserve the right to stop . . . the transmission of any private telegram which may appear dangerous to the security of the State or contrary to its laws, to public order or to decency” (Art. 34(1), Stoppage of Telecommunications, emphasis added).

“Member States also reserve the right to cut off, in accordance with their national law, any other private telecommunications which may appear dangerous to the security of the State or contrary to its laws, to public order or to decency” (Art. 34(2) Stoppage of Telecommunications, emphasis added).

“Each Member State reserves the right to suspend the international telecommunication service, either generally or only for certain relations and/or for certain kinds of correspondence” (Art. 35, Suspension of Services, emphasis added).

“Member States agree to take all possible measures . . . to ensur[e] the secrecy of international correspondence[, but] . . . reserve the right to communicate such corre­spondence to the competent authorities in order to ensure the application of their national laws or the execution of international conventions to which they are parties” (Art. 37, Secrecy of Telecommunications).

One proposal by the United Arab Emirates aims to replicate these measures in three new clauses to be added to the ITRs (Art. 7.3, 7.5 and 7.6, respectively), allowing such norms to do double-duty as high-level principles and day-to-day regulatory guidelines. The U.S. opposes the move, not because it sees telecoms and internet as a kind of global commons beyond the reach of harsh geopolitical concerns, but likely because the ITU already reflects the fact that national security concerns trump everything, and because it would not be unduly constrained by global norms anyway.  The US response to the UAE proposal is clear on the point: “We support retaining these provisions in the CS [constitution] and do not agree with . . . duplicating them in the ITRs”.

Cyberwar and the Fifth Domain of Battle: Militarization of the Internet versus Global Commons

The U.S. also refuses to be drawn into the proposals bandied about by Russia (mostly), China and a few other powerful military states over the past decade, this time to add a sprawling new section to the ITRs covering cybercrime, national security and cyberwar issues (Article 8A). The U.S. has rebuffed these moves for the same reasons mentioned above and, more to the point, because behind the veil of its global-internet-freedom-as- foreign-policy rhetoric is its more pressing conviction that the internet is now the fifth domain of war, alongside land, sea, air and space, a terrain where it grandiosely seeks to assert total infosphere dominance.

Seen in this context, overtures to “network defense and response to cyberattacks” (Article 8A.1) have no chance of adoption, even if setting aside the internet as a global commons under ITU protection outside the field of war might be a good idea. Moreover, and however, that rubicon has already been crossed with Russia believed to have been behind cyber-attacks against Georgia in 2008 and the Obama Administration’s recent admission that it played a role in the Stuxnet attacks against Iranian nuclear facilities.

Bearing those points in mind, Russian proposals to carve out new rules of cyberwar are hypocrisy, while the acknowledged facts of U.S. military policy means that it will dismiss such notions out of hand. Based on this, worries that additions to the ITRs intended to deal with such matters could serve as a Trojan horse for repressive controls over the internet can probably be safely tossed aside. It is worth noting, however, that amidst all the hand-wringing over the ITU threat to the internet, no one, as far as I know, touches upon how the hard realities of military power shape global telecom and internet policy, instead settling into numbing nostrums that pit the state against the individual.

A Laundry List of Many Items with Potentially Really Big Implications

Beyond the stance of the U.S. on the above matters, and questions of network defense and cyberwar, Article 8A starts off innocently enough, but quickly opens into a chamber house of horrors. It blandly refers to “confidence and security” in the title and the need to garner trust in online spaces (true enough), followed by a list of technical-sounding proposals about network security, data retention, data protection, fraud, spam, and so on.

Some of these principles are worthy of discussion, but the way they have been teed up for WCIT utterly fails to inspire confidence or hope. The measures are spearheaded by Russia and supported by China, with the latter telling us in the notes accompanying the proposals that new tools and rules are needed to:

“. . . protect the security of ICT infrastructure, misuse of ICTs, respect and protection of user information, build a fair, secure and trustworthy cyberspace . . . [with] new articles on network security in the ITRs”.

There is also a sundry list of other items included in the proposed new Article 8A as well as others drawn from recommendations at past conferences that deal with child online protection, fraud, user identity, etc.  One by one, most of these measures are reasonable, and most countries are dealing, on their own and in cooperation with one another, with all of them already.

Looking across all these proposals, however, reveals a raft of threats that, in their entirety, would usher in the foundation of controlled and closed national internet spaces that are subordinate to the unbound power of the state in every way:

• Anonymity and Online Identity are implicated in repeated references to the need for users to have a recognized identity. This comports well with laws in countries such as China that require internet users to tie their online identity to the ‘real-name’ identity but if identifiability is the first step to regulability, as Lawrence Lessig claimed a decade ago, than this raft of references insisting on the need for online identity is a problem (e.g. proposed new Art. 3.6, 6.10, 8A.7, 8A.8). As ISOC states, such moves entail a “very active and inappropriate role in patrolling newly defined standards of behaviour on telecommunication and internet networks and in services”. I agree;

• Privacy as well as Data Collection, Retention and Disclosure are mentioned as being critically important values several times (Articles 3.6, 8A.1, 8A.3, 8A.4) but are hemmed in by the repressive national security norms described above. While the wave of telecom and web monitoring bills currently under consideration just in the US (CISPA), Canada (Bill C-30) and the UK (Communications Data Bill) suggests that there is a need to reign in governments’ strong inclination to apply new surveillance and security measures to the internet, proposed changes to the ITRs would likely pressure telecom providers and ISPs to maximize rather than minimize the amount of personal data they collect, retain and disclose to state authorities.

• Internet content regulation is seen as a threat scattered across many proposed changes to the ITRs but I think most of these claims are, as noted above, overblown. This threat, however, does loom large, but is mostly concentrated in a proposal to add the new Article 8A to the ITRs. Focusing our attention there, I agree with ISOC that the new rules could speed along and legitimate the development of national internet content regulation.

The worst examples of this come in two places in the new Article 8A.4 put forward by Russia. The first appears in a passage that reaffirms people’s “unrestricted” right to use international telecom services but immediately clips such rights with the caveat: “except in cases where . . . telecommunication services are used [to] . . . interfer[e] in the internal affairs or undermin[e] the sovereignty, national security, territorial integrity and public safety of other states”. One can only imagine how such measures might steel the hand of governments intent to interrupt the flow of tweets, Facebook updates, and other social media interactions that have played an important role, for example, in Arab Spring, the Occupy Wall Street protests, Wikileaks, etc. This is an effort to replicate the national security values already found in the Constitution in the ITRs, similar to the proposals of the UAE outlined above, and should be opposed for the same reasons.

Things are made worse yet by including what we might call the ‘anti-Wikileaks’ clause immediately afterwards, a provision that would trump people’s right to communicate when telecom-internet facilities are used “to divulge information of a sensitive nature” (Art. 8A.4). Leaking ‘sensitive information’, however, is not a crime and the idea that the “sensitive nature” of info will serve as a standard has no reference in free speech/press law and ideals. It also assumes an unbound conception of the state’s security interests, and gives it carte blanche to do as it pleases.

It is impossible to reconcile such prohibitions against info disclosure/publishing/leaking with the goal of furthering the development of a global and open internet or the right to communicate and of the free press. Accepting such a standard would be a much more potent Wikileaks killer than the heavy-handed measures that have already been used by the U.S. because it would give a legal sheen to what the U.S. has had to do so far by skirting around the edge of its on laws. Through such a clause, states would have free reign to crackdown on whistle-blowers with impunity and without limits.

A Few Final Thoughts

This exercise has forced me to change my views. The proposed additions and changes to the ITRs are worse than I thought. It is important that proposals now on the table for discussion at the upcoming WCIT get as much critical scrutiny as they can, and seen in that light, the WCITleaks site created by the folks at the Technology Liberation Front is a very useful tool.

That said, the analysis of the ITU and the proposed changes afoot have been largely strained through the prism of ideology, indiscriminately jumbling together overblown claims with real insights. As far as I can see, it is not the myriad of small changes to one section of the ITRs after another that constitute the major problem, but rather a set of issues that are mostly clustered in proposals by Russia, and supported by China, to add new sections to Article 8.  The damage such proposals could do to unsettled internet policy issues related to anonymity and online identity, privacy and personal data protection, as well as internet content regulation are enormous and can hardly be exaggerated.

On a more modest note, I understand that there is a battle over language that will occur in other sections, notably in Articles 1 and 2 over the definition of telecoms, with those who believe that the ITU does not cover the internet rejecting at every turn proposals by those who do to pepper the ITRs with explicit references to the internet. I believe the ITU’s authority already covers the internet, but understand that the politics of language will play a big role as countries stake out their turf on the matter.

I see no new global internet tax on the horizon and do not believe that references to spam are the thin of the wedge that will lead to national internet content regulations being imposed in one country after another. The truly awesome power of the state over communications, including the internet, however, comes into view as soon as we realize how stilted the existing ITU framework is in favour of national security imperatives.

Indeed, national security appears to trump everything, including the right to communicate and the free press. The fact that such norms are derived from a history of suppressing popular uprisings in Europe ought to make us think long and hard about their continued role amidst the political uprisings and revolts sweeping the world. Attempts by the UAE and Russia (with the support of China) to replicate repressive national security values in the ITRs through additions to Articles 7 and 8, respectively, do pose a threat to an open internet and political protest the world over.

This is important, too, because while I doubt that such measures have much chance of succeeding, they mesh with certain trends that define our times, with moves aplenty to impose comprehensive telecom and web monitoring plans in one country after another, as well as the copyright maximalist agenda that is turning telecom-ISPs across the world into internet cops on behalf of the media and entertainment industries. Such initiatives will continue with or without changes to the ITRs, which also highlights the reality that the ITU’s influence in these affairs is limited and not omnipotent.

Even if the most repressive aspects of proposed changes and additions to the ITRs were approved, this would not bind the whole world to implementing a single internet model. It would, however, bless the national Web 3.0 spaces that are already being built on the basis of three layers of control: (1) the systematic use of filtering and blocking to deny access to restricted websites and the recognition of such measures in national law; (2) dominance of national internet-media spaces by national champions (Baidu, Tencent, Yandex, Vkontakte, Facebook, Google, Apple, etc.) and (3) the active use of government-driven internet-media-communication campaigns (propaganda) to shape the total information environment (See Deibert & Rohozinski, ch. 2). The changes to the ITRs being sought by some countries, notably Russia and China, would add a fourth layer – international norms steeped in 19th century models of state security – that would further entrench the web 3.0 model and further lay waste to more important international norms associated with the right to communicate and free press.

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.

Could CANARIE fly on its own?

While writing the last post on the potential termination of funding for CANARIE, I got in touch with someone who I have recently come to know and have a great deal of respect for, Bill St. Arnaud. Bill’s important to the CANARIE story because he was Chief Research Officer with it for fifteen years before starting off on new adventures in early 2010.

After reading CANARIE’s annual reports for the last decade and the Government’s budget for 2011-12 tabled last week in Parliament that signals the end of CANARIE as a government funded initiative, I got in touch with Bill to see if I was understanding things correctly. Here’s a brief reprisal of the email conversation we had:

DW:

Dear Bill, I was wondering if you could please help me make some sense of some numbers related to Canarie that I’ve recently come across in the Governments Budget for the upcoming year? I see that they refer to the ‘sunset’ of $31m in funding to Canarie last year, and zero allocated for the upcoming year. Surely that doesn’t mean that Canarie’s entire budget has been eliminated, does it?

BSA: CANARIE receives only block grants approximately every 5 years.  The last block grant was for $120m in 2007 . . . .  So currently CANARIE’s funding sunsets next March. . . . CANARIE has virtually no other sources of income.

Over its 15 years existence CANARIE has received almost half billion dollars in funding made from a multitude of block grants.  After the receipt of each block grant many times the government has told CANARIE that it should be self sustainable from that point on.  Finally I think this government actually means it this time.  But CANARIE’s board and management is actively lobbying government for another block grant when the current one expires next March.

However I have been arguing for some time that CANARIE should be self sustainable, at least on a day to day operational basis. Many of CANARIE’s counterpart research networks around the world are operationally sustainable like those in Australia, US, Nordic countries, Netherlands, etc.

Although some of these networks, from time to time do receive capital funding to invest in new infrastructure or build community networks. Being operationally sustainable, has its challenges (especially at this late hour), but it  has a number of advantages:

(a)    It would give CANARIE the freedom and independence to pursue more aggressive broadband strategies without fear of reprisals from incumbents lobbying government to prohibit such activities.  Internet 2, in the US for example, when it was created deliberately eschewed  government funding for this reason

(b)   CANARIE can do much better long term planning instead of having to stare at a 5 year horizon. The last block grant literally came at the midnight hour – and we had to start to give layoff notices to many staff just prior to receiving the funding

(c)    CANARIE can be a much greater force for innovation if it is self sustainable by offering innovative new services such as national wireless, zero carbon Internet, community networking etc

————————————————————————————————————

So, if Bill is right, then the end of government funding doesn’t necessarily mean the end of CANARIE.

But will it continue to operate as a semi-independent actor capable of experimenting with advanced versions of the Internet that will only become widely available years from now?  Will it continue to push the envelope when it comes to open network and interoperability principles that define the original, non-commercial Internet?

In other words, will it continue to set an independent, alternative high-bar standard against which the incumbent telecom providers — Bell, Shaw, Rogers, Telus, Quebecor, Cogeco, etc. — can be critically assessed?

While I struggled to get my head around the idea that it could be okay to cut CANARIE off of government funds cold-turkey, it also took a while to fully realize Bill’s first point: that CANARIE has been put under incredible constraints already by incumbents constantly badgering the government to keep it on a short leash. In other words,the incumbents have pushed to keep CANARIE from actually competing with them in ‘the market’. It’s done what its done, so to speak, with one arm tied behind its back.

So getting CANARIE off the government trough seems to be Bill’s way of hoping that doing so might give it greater room for manouver outside the constraints imposed on it by governments acting at the behest of incumbent lobbyist. This is an incredibly important point, but one might wonder if government ought not steel its spine and actually stand down the lobbyists?

My feeling is that it would be better, in short, to have continued public funding and proper shielding from undue commercial influence. In a perfect world, we could have both, but I now understand why Bill doesn’t see cutting funds for CANARIE as the death blow I originally anticipated.

Maybe this can all be made a bit clearer by drawing parallels to television and hockey. It is commonplace in Canada and all countries with any kind of public service media for commercial broadcasters to whine about the CBC ‘unfairly’ competing with them for the rights to air NHL hockey games and anything else that draws eyeballs and attention. And so too for CANARIE, because the comparisons drawn with the private sector might not prove so favourable, better to cordone it off in areas the private sector is willing to leave behind to begin with. Seeing things from Bill’s perspective we can only imagine what CANARIE might it do if set loose after being held on a short leash for all these years?

In all of this is a vital demonstration in the political economy of communication, and it is as old as the first telegraphs, submarine cables and so forth in the 19th Century, and that is that governments shall never compete with private capital for markets. In ‘normal economics’ it’s called crowding out, while a more radical perspective sees this as the subordination of democratically elected governments to the interests of capital, or business to put it more simply. Today, it’s putting things like CANARIE and the CBC on short leashes, so that they can be ‘remedial public’ programs, not hardcore alternative providers in ‘the market’.

We can also see this kind of thing in  familiar terms when we look across the Atlantic to the UK, where the BBC — a core public service media provider — is constantly under pressure from the likes of James Murdoch of News Corp. and the Newspaper Publishers Association, for instance, to trim its sales. The Newspaper Publishers Association, for instance, argues that the BBC’s online news ambitions “threaten to strangle an important new market for news and information”.

Translation? The BBC should be tied to the mast of a sinking ship: television broadcasting, with rabbit ears preferably, while the rest of the explosive digital and commercial media market is handed off exclusively to ‘market forces’. This is a point that has also been driven home to me by my friend and NZ communication scholar, Peter Thompson, who recounts how Canwest Media used its ownership of television and radio interests to similarly argue against anything other than the most minimal role for TVNZ. It is also the basis of our own Conservative Government’s Directive to the CRTC to ‘rely on market forces to the maximum extent possible’ (for another post on this with respect to UBB and bandwidth caps, see here).

But back to CANARIE, some economic independence from government coffers could lead to greater autonomy and fewer shackles. Yet, CANARIE could also simply be sold to the highest bidder, likely those who previously fought tooth and nail to constrain it? In that sense, it would be grafted onto the operations of one or other of the existing incumbents and constitute yet another moment when government policy serves a primary purpose: to expand markets and open new sources of revenue for the private telecoms carriers.

These are some critical questions and with nothing more than a line item buried in the budget alerting us to any of this, we should start thinking about these questions now before CANARIE really does come to the end of the line in March 2012.

** With thanks to Bill St. Arnaud for his help and agreeing to let me use our correspondence for this post. Bill’s blog can be seen here.

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.

Telus Hearing Angels?

The other day I posted that Telus stands apart from the other dominant integrated telecom and media giants in Canada — Bell, Rogers, Shaw, Quebecor and Cogeco — on several grounds.

First, that while it has Usage Based Billing and bandwidth caps on the books, it has yet to implement them — although it has just announced plans to do so. If it does, it will be in the same league as the rest of the incumbents. Until then, there is still a chance that it will back down.

Second, unlike the other ‘big 5′, it is not a fully-integrated media conglomerate. It does not own broadcasting or other major ‘content’ services.

Third, it is opposed to vertical integration because companies that own the ‘medium’ and the ‘message’ lock up content in ways that are anti-competitive and against open networks. It is already encountering the difficulties that that entails in its attempts to gain programs for its IPTV, mobile tv services, etc.

Today, Telus filed documents for the upcoming CRTC hearings on vertical integration outlining that opposition. It is worthwhile to read. Here’s a link and another.

The following quote from Telus press release announcing its position gets to the thrust of its position:

“The unprecedented concentration of market power in the broadcasting sector created by the common ownership of programming services and distribution platforms requires regulatory safeguards to protect consumers . . . . The potential for abuse of market power is real and the risk to consumers is significant. Without proper regulatory safeguards consumers could soon be facing increased costs and reduced choice in their TV viewing options.” Michael Hennessy, senior vice-president Regulatory and Government Affairs at TELUS.

To be sure, unless it renounces plans for UBB, bandwidth caps and to stop throttling P2P services and OVP (online video providers), Telus is certainly nowhere being on the side of the Angels. However, it has gone part way down the right path, and in so doing, broken ranks with the others who simply see the Internet as a threat and merely an adjunct to their ‘business models’ when useful.

No ABC in 1st 2011 Canadian Election Debates

No Australian Broadband for Canada, or much to do with the Internet, media, telecoms and copyright issues at all in tonight’s federal election debate.

Before I go any further, though, let me confess that I did not watch all of the federal election debate tonight. I’m sorry, I had other things to do. But I did catch about a half-hour of the debates on tv, another 10 minutes on radio while in the car, and another 15 minutes of video with no sound while at the gym. I may have missed something. Zygmunt Bauman calls it the ‘liquid life’ — that is, cobbling things together to make up your life on the fly.

But, I think I caught the gist of things and that is that none of the leaders really had much to say on media and Internet issues. Nothing about copyright or the uproar over Usage-Based Billing. In other words, none of the ABCs of ‘digital media policy’ merited much attention.

To be sure, I didn’t expect broadband Internet, media, copyright and UBB to be at the top of the agenda in tonight’s federal election debates. In fact, such issues probably should not be at the top of the agenda and generally I agree that funding pensions, healthcare, the general state of the economy, widening economic inequality, and the moral integrity of the Government-of-the-day are probably more important. Still, though, I didn’t expect digital media and Internet issues to be left out altogether, either.

There are a great many who wield fancy labels like the digital media economy, creative industries and the lot to give such issues a lustre and limelight they may not deserve. Big economic numbers for the media, telecom and Internet industries, and their contributions to the economy, culture and society, are often wielded about to underscore the impressiveness of these things. There is, truth be told, a great deal of puffery involved when it comes to talking about these things.

All of which is to say, that while I agree that digital media and Internet issues probably should not be artificially hyped, they should not be peripheral too the election, or just a blip that gets twittered about opportunistically amongst the twitterati. Why should we care if these issues are not at the centre of televised electoral debates?

First, because as a study by Canadian Media Research Consortium just released underscores, television is still people’s preferred medium for information and news. Television still plays an extraordinary powerful role in bringing things to people’s attention. This not just true for old people or couch dwellers, either. The fact of the matter is that those who spend the most time online are also the heaviest traditional media users, too.

Second, most of the primary news sources behind online news sites are creatures of the dominant traditonal news providers: CTV, Global, CBC-Radio-Canada, Globe & Mail, Toronto Star, Le Presse, Quebecor Media Inc. These entities largely, although not exclusively, play a big role in setting the news agenda for the country’s media as a whole, including the ‘news aggregators’ and blogosphere that thrive off of their efforts.

Of course, we can gain access to the New York Times, Le Monde and the Guardian or the Huffington Post, but they aren’t going to be much help on matters specifically Canadian in focus. Elections are one just such crucial matter.

For issues to be taken as a going concern in a democracy, they must be on the media screen, and in today’s world that means being on at least three different screens: the ‘big screen’ of tv, the glowing screen of the computer, and the wee screen of portable ‘devices’.

Third, media and Internet issues have been central themes in other national elections and politics. Network neutrality and broadband development were cornerstones of the Obama campaign in 2008, for instance; his administration has also paid considerable attention to issues surrounding the so-called ‘crisis of journalism’ and media concentration since then.

In Australia, the Government’s creation of a National Broadband Network to do an end-run around a recalcitrant incumbent — Telstra — in order to bring about a ultra high speed, broadband Internet service to ninety-plus percent of all Australians was extremely prominent and divisive in the 2010 federal elections. The Labour Government now in power supported the initiative, as did the Greens, a few independents, Microsoft and Google.

In Canada, the Usage Based Billing issue has received pretty good coverage in general, but broader media and Internet-related issues and, specifically, their place within the context of the elections, have not fared so well. The link between the media and Internet, on the one side, and electoral politics, on the other, has mostly been made on the Internet and Twitter.

This is important because, as the Canadian Media Research Consortium study pointed to above states, if stranded on a desert island, the internet is the least likely of all media to be let go by people. The importance of the internet in general is reflected in the uses of Facebook and Twitter in particular.

Facebook has been central to the efforts of the advocacy group OpenMedia.ca to make these issues an important part of the election campaign and all the political parties have responded rather eagerly, even if sometimes opportunistically, to ‘trending Twitter topics’ and Facebook-based campaigns.

At the end of 2010,Twitter had an impressive average number of monthly users in Canada of around 3.5 million, according to Comscore (p. 19).  That’s a lot. Many fear Twitter-induced attention deficits and depraved forms of journalism will be the natural upshot of Twitter’s 140 character per tweet format, but Alan Rusbridger, the editor of the Guardian in the UK, offers a rousing defense of its contributions to journalism and to public discourse.

However, we also must remember to keep things in perspective. The number of people who use Twitter — roughly 3.5 million a month — is less than the number of people who watched the debates last night or that buy a newspaper every day.  In terms of credibility and trust, the press blows away online sources, and television still fares somewhat better as well — although not much (see p. 14 of the Canadian Media Research Consortium study).

The Twitterverse is also a lot smaller than Facebook. With 22 million unique users a month, Facebook has nearly 7 times the number of unique monthly viewers in Canada (22 million) than Twitter has.

Interestingly, the Broadcast Consortium overseeing the organization of the federal election debates had the foresight to add a Facebook page to the mix of how political debate is circulated in the emergent network media ecology. The development suggests an interesting attempt to meet people where they are.

Facebook also raises anew questions about the relationship between popular culture, the media and politics. Its increasing pivotal role has drawn it closer to traditional conceptions of news and politics. Its inclusion as a formal part of the ‘operational machinery’ of the first televised English-language debates are one indicator of that. Recent overtures by Facebook to news executives is another.

Indeed, as a story on the Globe and Mail’s technology website the other day relayed, Facebook “is looking to strengthen its relationship with the news media and has already helped boost traffic to news websites” (see here).  It also created a special Facebook page just for journalists who want to integrate social media into the journalism process.

The New Yorker drew the connection a step further this month by requiring online readers of the magazine to use Facebook’s “Like” icon to gain access to one of its articles. The experiment essentially sets up the “Like” button as a kind of  ”paywall”, but one that tries to translate the ‘social capital’ of Facebook users into a real pot of gold that many commercial media providers hope exists at the end of the digital rainbow.

All of this, of course, adds yet another wrinkle in the ‘evolution of the news’, to put it somewhat grandiosely. To date, the debate has been much about the impact of ‘content aggregators’ like Google and Yahoo on the news industry, and wails from many stalwarts in the latter that the blogosphere lives parasitically off the hard labour of real news organizations and journalists. Enter Facebook stage left.

There is something in all this related to the ‘functional convergence’ between ‘search’ and ‘social’ that I spoke about last week in relation to what I called the Google Switch — i.e. Google’s response to increasing competition from Facebook by increasingly adding ‘social capabilities’ such as ‘+1′ to its ballooning suite of functions such as Orkut, YouTube, Blogger.  However, in the circumstances just outlined, the drift is not from search to social, but rather the other way around. If such a ‘functional convergence’ is in fact taking place, then perhaps it is not just Google, but Facebook and other social networking sites, that will emerge as pivotal to the ‘future of the news’.

Communication researchers have always understood how media and information flows are nestled within existing networks of personal relationships.  Now the process is being digitized, fully commercialized, and rendered visible. Through all of this, will Google and Facebook be good for the News, good for democracy?  Hmm, now there’s a question ripe for pondering in the context of the 2011 election.

Two Open Broadband Internet Proposals vs the Pay-per Internet Model

Two new research papers released in the past week add insight into the Usage-Based Billing (UBB) debate in Canada, or what I have been calling the evolution of the pay-per Internet model. The papers are by Michael Geist, the University of Ottawa law professor, and by Bill St. Arnaud, the Chief Research Officer for CANARIE for 15 years (until 2010) and a telecoms engineer. Geist’s paper can be found here, while St. Arnaud’s paper is here.

Both papers were commissioned by Netflix, in light of the fact that developments in Canada are sucking it and others such as Google, Apple, and so forth deeper and deeper into digital media policy issues. All are becoming fixtures in CRTC proceedings. Both papers bear one significant subtle influence of this sponsorship (as I will discuss briefly below), but other than that provide extremely valuable help wading through the technological, economic and regulatory issues surrounding the UBB debates.

Geist and St. Arnaud are both convinced that the CRTC’s plan to revisit it’s January 25th UBB decision that ignited the firestorm over the pay-per Internet model in Canada is far from sufficient. As Geist indicates, a whole series of decisions over the past few years will have to be revisited and the regulator and policy-makers are going to have to deal head-on with the fact that underlying these problems is a heavily concentrated market for Internet access in Canada. I feel similarly, and have laid out the ‘long march’ to the pay-per Internet model in an earlier post.

Playing on earlier decisions regarding the incumbent telecom and cable companies use of technical measures to ‘throttle’ different types of Internet uses that they argue put excessive strain on their networks — the so-called Internet Traffic Management Practices — Geist’s first proposal is for a series of what he brands IBUMPs (Internet Billing Usage Management Practices). The basic gist of which is to make the incumbents’ billing practices for Internet services easy to understand and reasonable when it comes to so-called excess usage charges.

His second set of proposals aim to promote greater competition in the Internet access market. This includes allowing more foreign competitors to enter Canada.

It also involves allowing smaller ISPS and Content Distribution Networks (see below) more scope to interconnect with the incumbents’ networks much deeper in the network and closer to subscribers’ homes (especially the cable companies, who have dragged their heels on this matter for more than a decade). Finally, it means cultivating a greater role for alternative Internet access providers, from city-owned networks, to cooperatively run ISPS, as well as expanding the role of provincial and federal broadband development programs.

As an interesting aside, the Liberal Party’s platform announced on April 2nd as part of the current federal election campaign effectively doubled the commitment that the Liberals would put into expanding broadband networks in remote and rural areas compared to the modest $225 million announced by the Conservatives in 2009. The Quebec Government went even further in the 2011-12 budget passed in March, where it announced that it will invest around $900 million in bringing very high speed Internet access to all Quebecois (see here at pages E.93-96; also see St. Arnaud).

It did not specify the exact capacities of the network, but its references to similar plans in Australia, France, Finland and the US suggest that the bar is high, probably around 100 MBps. Neither the Liberal Party’s election platform nor even the much more ambitious Quebec Government’s scheme are equivalent to or the same as Australia’s National Broadband Company initiative, and nor should they be.

However, they do underscore (1) the under-development of broadband Internet in Canada, (2) the lack of competition offered by the current market, and (c) a willingness to rely on a variety of providers, from the traditional incumbents, to municipalities and provincial governments to improve on the situation at hand. They also suggest that Geist’s proposals, far from pie-in-the-sky, are grounded and with some real, even if tentative support in some crucial quarters.

Bill St. Arnaud’s paper also offers much food for thought and complements Geist’s paper very well. He makes three key points.

First, the massive growth of video online is not necessarily causing congestion. Huh?  How could this be, with clear evidence that the growth of video traffic has been stupendous, ranging from 50 to 100 percent per year and with continued high rates of growth expected in the next few years ahead?

This is because sources responsible for this massive increase are increasingly turning to Content Distribution Networks that, basically, bypass the public Internet and deliver their content as close to their subscribers as possible. These so-called Content Distribution Networks are not only being deployed by outfits such as Netflix, but other large Internet content and service providers, from Amazon, to Google and Facebook. The basic point is that they take traffic off the network for much of the distance a message has to travel.

Second, to the extent that congestion is a problem, this is an outcome of decisions made by the incumbent telecom and cable companies about how to apportion the capacity of their network. As Geist quips in his paper, the ‘chicken roasting channel’ recently introduced by Rogers, for instance, is just so much bandwidth allocated to that ‘service’ rather than to the Internet.

Third, and this is where I think St. Arnaud has an amazingly powerful and clear point, the incumbent telecom and cable companies — the ‘big six’, as I have called them: Bell, Rogers, Shaw, Telus, Videotron and Cogeco — appear to have no problem with congestion when it comes to launching their own video content services delivered over the internet, e.g. CTV.ca, globaltv.ca, TVA.ca, etc. Congestion is only caused by other providers’ video services.

Lurking in the background of all this is that we’ve seen this all before. A few years ago, P2P/file-sharing and music downloading sites were the culprit; now the target is online video services. The cable companies have been especially remiss in dragging their feet for a dozen years or more on allowing independent ISPs to access their distribution infrastructure. Despite being required to do so before the turn-of-the-century, the cable cos have thrown one obstacle after another in the path of ISPs requiring last mile access through cable facilities to gain access to subscribers.

All said and done, Geist and St. Arnaud’s paper respectively do a great service. They are timely interventions that help us understand the issues at hand and, if successful, they may help to frame the debates that take place at the hearings that the CRTC has scheduled to revisit the UBB decision in June.

However, we should not hold our breadth on that, and in that regard these papers do a real good job at holding the regulator’s feet to the fire (see my earlier post on this point). The CRTC has a very broad remit to regulate in these matters, as the Telecommunications Act (1993) (sec. 27 (5)) makes clear, but has chosen to draw the proverbial camel through the eye of the needle. With the magnitude of the issues at stake, this is unacceptable.

However, I also think that both papers need to go even further in at least four ways. First, both papers make claims about the highly concentrated state of the telecom, cable and Internet access markets in Canada, but offer little to no data to illustrate and support these claims. Good quality data is now available on these points and they should use it.

Second, both papers focus on the UBB issue, or what in regulatory parlance is now called an economic measure for managing congestion on the Internet. However, the CRTC’s Internet Traffic Management Practices decision (2008) sets out a hierarchy of preferences for dealing with such problems when they can be shown to exist: (1) network investment, (2) economic measures such as UBB, and (3) technological measures, aka throttling.

Neither paper says much, if anything, about the top priority: network investment. Why? At between 15-18 percent of revenues, current levels of investment in their networks by the big six is low by historical and global comparative standards (although in line with similarly low levels in the U.S.). And this despite the fact that the Internet represents a massive new source of revenue ($6.5 billion in 2010).

Third, neither paper pushes as hard as they might on how the use of UBB and the allocation of network capabilities by the incumbents to their own services may constitute a form of “unjust discrimination”. The issue is not totally ignored by any means, but I think it could be pushed further and that doing so is important not just to the question of whether or not we’re going to be stuck with a highly concentrated Internet market and the pay-per Internet model in Canada, but concentration across the whole sweep of the network media ecology, from traditional media to the Internet.  Let me explain. I’ll conclude by returning to my fourth point.

Insofar that these papers deal with ‘unjust discrimination’ they seem to have in mind section 27 of the Telecommunications Act that specifically outlaws such practices. It is a good victory to be had, if it can be had. And the CRTC has, as I stated above, much discretion in how it goes about making such determinations. To the extent that it has chosen to blinker itself is a problem of the first order.

However, it may be possible to go even further and look to the next clause of the Telecommunications Act, section 28, that specifically makes the issue of discriminating between video services, or broadcasting as such things were known when the act was written nearly 20 years ago, a matter of potential concern. Indeed, the CRTC has enormous authority under this section to deal with the issue of discrimination while meeting other objectives of the Broadcasting Act.

Herein, however, may lay the rub, given that both of the papers being discussed here were funded by Netflix, and the last thing that it and other services like it (read: Google, Apple, etc.) want is to be defined as broadcasting services, which could happen if we were to assign the ‘online video distributor’ label on them like the FCC and Dept of Justice did recently in the US in relation to the Comcast/NBC merger.

I, too, am very leery about slapping the label of broadcaster on such entities because of all that would mean with respect to CanCon rules and the like. The CRTC has always indicated that it believes that it has the authority to regulate online video distributors under the Broadcasting Act (see its seminal 1999 new media decision here), but up to now has not seen Internet television services as being significant enough and too experimental to actually do so.

The question of whether ISPs could also be brought under the purview of broadcasting regulations so that, just like cable and Direct-to-Home satellite providers, they too could be required to contribute to funding and displaying CanCon has also been hotly contested. That route seemed to be foreclosed by a Federal Court of Appeal decision in 2010, but that too has now been appealed to the Supreme Court of Canada.

Now, the incumbents en masse are pushing hard to have OVDs like Netflix, Apple and Google regulated as broadcasters just like their own broadcasting-related services. The irony here is that for Netflix to push its case on UBB as hard as possible, adding some water to its wine by accepting some such designation could go a very long way to putting a stop to the discriminatory practices that are now hobbling its access to Canadian subscribers.

While this is far beyond the scope of what I can say here, perhaps a new designation along the OVD line devised in the US might be imported into Canada for just such purposes. That would mean distinct treatment from broadcast television in general, but also some obligations to open up their services to Canadian media creators.

It might also allow a much more forceful push against the anti-discrimination rules of not just one section of the Telecommunications Act, but both sections 27 and 28. Done right, this need not ‘trap’ new players like Netflix in the maw of outmoded aspects of the Broadcasting Act. Instead, it could potentially help to usher in an entirely new media model where all of the bits and pieces that make up the traditional media model are disassembled and reassembled anew in light of the realities of the digital network media industries in the 21st century.

And finally to return to my fourth critique of the Geist and St. Arnaud papers. Both papers target the upcoming UBB decision. This is great, but I think it might be helpful to try and kill two birds with one stone by putting another potentially even more important upcoming regulatory review in their sights: namely, the CRTC’s hearings scheduled for June 2011 on vertical integration.

The ‘vertical integration’ hearings were scheduled late last year but given added impetus when the CRTC approved Bell’s acquisition of CTV last month. The idea of holding such hearings reflects the fact that Canada now also has the dubious honour of standing alone in the extent to which fully-integrated media conglomerates have become the norm. In the U.S., the fully integrated media conglomerate has become the exception (e.g. Comcast/NBC-Universal) after the disastrous AOL Time Warner merger and is pretty much in retreat in almost every other developed capitalist democracy.

There is indeed every reason to be very skeptical about these hearings given that they are a classic case of “bolting the barn door after the horse has already left the stable”. However, given that the use of UBB is completely tangled up with the crucial question of whether or not the “big six” media conglomerates in Canada — Bell, Shaw, Videotron, Rogers, Shaw, Telus (the latter to a lesser extent) — are using the pay-per Internet model to disadvantage competitors and to protect their own traditional television services, as well as their recently-minted internet video services, we must keep our eyes on the full range of big issues before us.

The Google Switch and +1: Search vs Social, Google vs Facebook

Today, according to the press releases now multiplying like bunnies across ‘online news sites’ and major newspapers of record around the world, Google added a social layer to its search functions.  It’s new “+1″ function is the online media behemoth’s response to Facebook’s ubiquitous “Like” function, although Google has been ‘going social’ for a while (e.g. Orkut, YouTube, Blogger).

Why does this matter anyway? For one, it gives us insight into two key functional characteristics of the Internet — search and social. It also sheds insight into Google itself, a subject that has gained increasing attention from academics such as Siva Vaidhyanathan (the Googlization of Everything), the media savvy journalist Ken Auletta (Googled) and staunch ‘new digital media’ sage and Google defender, Jeff Jarvis (What Would Google Do). Google is big business and what it does matters.

Google is increasingly competing for advertising revenue and Internet users’ time and attention with Facebook. Indeed, a shrinking number of digital media giants are battling for control the time that people spend online. This is especially important in Canada because Canadians, according to Comscore’s 2010 Canada Digital Year in Review, are the heaviest Internet users in the world spending, on average, 43.5 hours per month — greater than the 33 or 36 hours spent online per person in the U.S. and Korea, respectively (see p. 6).

In some ways, +1 is just another addition to Google’s ballooning suite of functions: search, gmail, Google Books,Blogger, Docs, browsers (Chrome), video (YouTube), operating systems (Android). The aim is to grab more of users’ time and to put more and more of the Internet ‘in the cloud’. In this case, it is Google’s cloud.

More services provides more reason for people to stick around with Google, rather than just the typical ‘search and run’ mode.  Moving more services off the desktop and in the cloud also keeps people connected more often, in more places, and for longer periods of time overall. This has largely worked from Google’s point of view.

This is why Google dominates online advertising markets and search — accounting for between 75 and 95 percent of all searches — in every country, except Russia, China, Taiwan, Japan and Korea. The power of search as a general utility, and Google’s role as the leading provider of this utility, is also growing in lockstep with the rapid growth in smart phones and the mobile Internet, as a recent Goldman Sach’s presentation shows. Overall, search dominates social in the ‘mobile Internet’ and Google’s grip with respect to search functionality is typically growing across the board.

There are a host of things that we should rightfully be concerned about by Google’s dominance of Internet search functionality and as things migrate from the devices and desktops in our own home’s to someone else’s cloud (read my earlier post on ‘social media and memory ownership‘).  Siva Vaidhyanathan has recently provided an extensive argument, in the Googlization of Everything, for why we should care. Some of his arguments are very thought-provoking. They go well beyond just the issue being discussed here. Here is a video clip of him responding to the question whether Google is a monopoly.

I don’t find Vaidhyanathan’s account quite as good as he seems to think it is, or quite as deserving of the praise showered upon it by some reviews. Some have trashed it, as the libertarian technophiles at the Technology Liberation Front did, but I definitely don’t think that their dismissal is right either.

Google is shaping the architecture of the Internet and the digitization of the media industries across the board. To think otherwise is to have one’s head buried in the sand. To think through why it’s important, however, is another matter.

Google so far has provided primarily utilitarian functions: search, scan, link, store. However, its not these functions, but rather the ‘social web’ and social networking sites — Facebook in particular — that are growing fast. Time spent on SNS sites overtook email in late-2007, according to the Goldman Sachs’ presentation referred to earlier. Will search be the next ‘killer app’ to fall?

The drift from search to social means that Google is increasingly competing with entities like Facebook — for users, for capital investment, for advertising revenues. In terms of the number of unique Internet page views per month, the yawning chasm that once stood between Google and Facebook has steadily closed (see here).

It is from within this context that we can understand why Google’s vast ambitions to colonize every nook and cranny of cyberspace/network media space now include adding “a thicker social layer” to its offerings. Always count on the tech-heads and marketing mavens to come up with a good line to summarize what’s going on. Here’s Dave Karnstedt, CEO of Efficient Frontier, in an March 30, 2011 Advertising Age article: ”Injecting a social layer into the algorithmic search is key to relevance.” Translation: friends and family are key to Google’s bottom line.

Google’s ambitions have been seen as competing with and forcing traditional media to adopt new methods for the music, television, film and news industries for some time now. Now, competing with Facebook for the new coin of the realm — user attention — can be added to the list. There are several important dimensions of this.

The shifting balance between search and social needs to be seen in the context of competition for advertising revenues. Internet advertising growth is and has been explosive, growing globally from roughly $16b in 1998 to $66.2b in 2010. While online advertising has indeed grown very fast, we need to bear in mind several things.

First, recent trends will not not continue forever because, yes, like the ‘real world’, advertising spending online is subject to the ‘normal laws’ of capitalism.

Second, Internet advertising is tiny in comparison to Internet Access market, the pipes and ISPs that run the infrastructure that get content from one place to another: worldwide, the Internet access market in 2010 was worth $247.5b, or four times the size of online advertising market. It is smaller yet than the global television market: $351.3 billion in 2010.

Third, like the rest of the media economy, online advertising is also highly susceptible to swings in the macroeconomy. Like almost every other sector, except movies, Internet advertising fell in 2008 and 2009 amidst the global financial crisis attests.

Fourth, attention online has become more and more concentrated. According to figures cited by Wired, the top 10 websites in the US in 2001 accounted for by 31% of all page views. By 2006, the number had grown to 40 percent. In 2010, the top 10 accounted for roughly three quarters of all page views.

Online advertising is also very concentrated. With revenues of roughly $30 billion in 2010, 97 percent of which come from advertising, Google dominates the global online advertising revenue (e.g. accounting for 44% of the total $66.2 billion in online revenue in 2010).

In other words, while the galaxy of websites, blogs, information sources, uses, etc. continues to grow, Google and Facebook are becoming bigger constellations within the overall Internet universe. Growing concentration is sharpening the struggle between search and social, or between Google and Facebook — at least for the time being.

Google’s attempts to insert itself at the cross-roads of the emerging network media ecology have also upset many interests in the news business, book publishers and authors, as well as those in the television, film and music business. Many of these groups are pushing hard to leverage Google’s dominant position at the cross-roads of search as a major chokepoint for intercepting illicit downloads (see my earlier Rogues, Pirates and Bandits and Goliath vs. Goliath posts).

Cleavages between Google and the traditional media industries also means that its attempt to launch Google TV has met with mixed results. The fact that it has ruffled so many feathers is not unconnected to this.

The significant tensions between Google and other elements of the traditional media also plays into the competition between Google and Facebook.  This point was underscored last week when Time Warner chose Facebook to distribute  the latest Batman sequel, Dark Knight. For $3 a shot, Facebook subscribers can now download Dark Knight from the SNS. Does this mean that Facebook and other SNS will become significant new distribution channel for traditional media?

With its own ambitions for Google TV already having a hard time getting off the ground, Google now faces  the prospect of competing with Facebook for a role in the online television and movie distribution business, alongside AppleTV, Netflix and the incumbent media conglomerates’ own ‘over-the-top’ offerings such as Hulu. Add to this that search is a utility, while social networks function as the electronic watercooler of the digital network media, and we can see why Google is scrambling to make the shift from search to social.

Popular entertainment has always relied heavily on massive marketing and word of mouth, with the latter point being given ‘scientific heft’ by classic studies in communication by Lazarsfeld & Katz in the late-1940s and early-1950s. Today, the links in the two-step flow that they identified in ‘small town America’ have been digitized and commoditized writ large.

As Christian Fuchs, Mark Andrejevic, Elizabeth van Couvering, and a few others show, search and social functions are fundamentally intertwined in the production of the audience commodity and the organization of audience attention. They are also crucial to organizing the vast quantities of user created content (UCC) that underpins the digital media economy.

Together, these functions are crucial to the digital media economy and the sky high market capitalization of entities such as Google and Facebook. However, with social already putting the Internet’s first ‘killer app’ — email — in a downward spin, we can ask: is search (and Google) next? Or, will these two functions themselves converge?

4 Phases of Internet Development: From the Open to the Contested Internet

I’ve just come across what looks like a very interesting article by John Palfrey, a Harvard Law School Professor. You can find the article here.

Here’s the basic gist of the article, in his words:

The four phases of Internet regulation are the “open Internet” period, from the network’s formation through about 2000; “access denied,” through about 2005; “access controlled,” through the present day (2010); and “access contested,” the phase into which we are entering.

The paper draws on a decade of interdisciplinary work conducted by members of the Open Net Initiative, a group that consists of researchers who I have long thought have been doing some of the best work on the topic at the Citizen Lab at the Munk Centre, University of Toronto (Prof. Ron Deibert, principal investigator), the SecDev Group (Rafal Rohozinski), and the Berkman Center (Palfrey and Jonathan Zittrain).

Cassandra’s and Copyright: Creative Destruction and Digital Media Industries

A new study released yesterday on peer-to-peer content sharing and copyright in the United Kingdom, Creative Destruction and Copyright Protection, provides a further challenge to those who claim that strong new measures are needed to make sure that swapping digital content online does not damage the bottom line of the media and entertainment industries. The study was co-authored by London School of Economics and Political Science Professors Bart Cammaerts and Bingchun Meng.

It is a part of several steps being taken in the U.K. that challenge last year’s hastily passed Digital Economy Act. The bill became law after only two hours of debate in the House of Commons and is a real gift to the media and  entertainment industries and the various lobby groups that represent them: e.g. the International Federation of the Phonographic Industry (IFPI), its British counterpart, the British Phonographic Industry Association, the Recording Industry Association of America (RIAA), Motion Picture Association (MPA), and so on.

Among other things, the Act turns Internet Service Providers into agents of the media and entertainment industries. Upon notification, ISPs must send a warning notice to suspected copyright infringers and if that does not work they can be directed by the Secretary of State to disconnect the offending user.

As the IFPI noted in its latest Digital Music Report, it has been pushing for such measures around the world in the past couple of years. Indeed, this push supersedes the emphasis earlier in the decade for DRM (digital rights management technologies).  The IFPI has chalked up several ‘wins’ for this approach in the UK, France, Sweden, South Korea, Taiwan, and a few others (see pp. 25-27).

Two of the biggest ISPs — BT and Talk Talk — in the UK have not taken these requirements lying down. They have launched a legal challenge that will be heard this week by the UK High Court of Justice on the ground that the Digital Economy Act’s requirements amount to overkill.

Cammeart and Meng are clear that P2P technologies should be encouraged rather than discouraged. In contrast, the Digital Economy Act stifles innovation and attempts to shore up faltering traditional business models. The message of this report, in other words, is that governments are not in the ‘business model’ protection racket. However, as I have written in earlier posts, that they are in just such a business is also evident in Canada, where Usage Based Billing is clearly linked with attempts to protect the cable and telephone companies forays into the online video business by hamstringing would-be rivals such as Netflix, Apple TV, even Youtube.

In contrast to the current approach, the authors and various people interviewed for the study suggest a significantly different approach. Thus, as one of the report’s authors, Bart Cammaerts states,

“The music industry and artists should innovate and actively reconnect with their sharing fans rather than treat them as criminals. They should acknowledge that there are also other reasons for its relative decline beyond the sharing of copyright protected content, not least the rising costs of live performances and other leisure services to the detriment of leisure goods. Alternative sources of income generation for artists should be considered instead of actively monitoring the online behaviour of UK citizens.”

Early in the report, they also quote from Ed O’Brian from the band Radiohead, who had the following to say:

“We disagree with the industry on what should be done with the persistent file-sharers. The industry has said we will suspend their internet accounts. But you can’t just do that, it isn’t possible and neither feasible. The kind of technical measures that are required to implement this get you into dodgy areas such as civil liberties, tracker software and the second thing is that it costs a lot of money to do this, and even if you do it, you are going to drive a lot of people underground into darknets. Our problem is how do you differentiate between a serial infringer and someone who does it in the spirit of discovery” (Ed O’Brian from Radiohead on BBC, 22/09/2009).

My only real criticism of this report is that the authors take the IPFI’s data on the drastic decline in sale of recorded music at face value, but attempt to offset it by pointing to changing patterns of music consumption, falling disposable household income and the rise of online digital platforms. Their points are well-taken.

Indeed, income levels in western capitalist democracies, including Canada, have largely stagnated for the past 30 years, while wealth has concentrated at the top. To this, we can also had the decline in ‘liesure time’ over the same period, as the historical tendency for the workday to shorten was reversed, resulting in people spending greater and greater amounts of time at work. It doesn’t take a genius to understand that less time and money erodes media consumption.

Such trends run exactly counter to the massive rise in both income and ‘liesure time’ that gave rise to the media and entertainment industries between 1870 and 1945, as Gerben Bakker exhaustively illustrates in his 2009 book Entertainment Industrialized.

These points are indeed important, but I would add another that I think is even more important: namely, that taking into account all sources of income, the music industry has not contracted, but expanded greatly since the late-1990s, precisely alongside the massive popularization of the Internet. In order to understand that, we need to focus not just on the sale of ‘recorded music’ and ‘online revenues’, but also publishing royalties and, crucially, live entertainment. When we do that, as I showed in another post last week, the music industries have expanded greatly.

Here’s the data showing, first, the drastic decline in the sale of recorded music, followed by the full picture:

Figure 1: Worldwide ‘Recorded Music Industry’ Revenues, 1998 – 2010 (US$ Mill.)

Source: Source: PWC (2010; 2009; 2003), Global Entertainment and Media Outlook

Clearly, just on the basis of recorded music sales, the music industry is in dire shape indeed. However, things look decidedly different once we take a look at the full picture, as the following figure does.

Figure 2: Worldwide ‘Total Music Industry’ Revenues, 1998 – 2010 (US$ Mill.)

Sources: PWC (2010; 2009; 2003), Global Entertainment and Media Outlook and IDATE (2009). DigiWorld Yearbook.

The top line shows the picture: a sharp increase in total revenues. Against declining revenues for recorded music, each of the other segments has risen considerably: Internet/mobile; publishing and concerts. Cammaerts and Meng do an excellent job showing the rise of digital revene

CRTC Approves More Media Consolidation: BCE’s Acquisition of CTV / CHUM (again)

This is a first take on today’s decision by the CRTC to approve BCE’s return to the broadcasting business (full decision here).  For those with what constitutes an elephantine memory in these fast and harried times, BCE had taken CTV over once before, in 2000 and failed. It left the television business six years later.  Today, it returned with the CRTC’s blessing and typical sop thrown to the Canadian ‘broadcasting system’, albeit at perhaps an even more meagre and self-serving level than usual.

The decision allows Bell Canada Enterprises a second run at making vertical integration and so-called synergies work between its telephone, satellite and ISP (i.e. network infrastructure) businesses and the largest media group in the country, with its CTV and A-channel networks, 31 satellite and cable television channels, 28 local television stations and 33 radio stations.  The only things really different than 10 years ago is that BCE has dramatically scaled back its ownership stake in the Globe & Mail (the Thomson family holds the rest) and sprawling media conglomerates have, by and large, gone out of fashion since the turn-of-the 21st century.

Another important thing that should catch our eye is that the value of CTV is now less than it was a decade ago, not because the tv business has shrunk — overall it has expanded from a $5 billion industry to one worth $7 billion (adjusted for inflation) — but because the first six year’s of BCE’s tenure were pitifully poor. CTV was worth less than half its original value when BCE left in 2006.  Today, and after all the growth in the industry plus the acquisition of CHUM, the combined value is about the same as CTV was ten years ago: $2.45 billion.

That number is important because it’s the one that the CRTC uses to peg the value of the contributions that BCE will have to pay into the ‘broadcast system’ in order to gain the CRTC’s blessing. At ten percent, BCE’s contribution is $245 million.  Even worse, $65 million of that amount will go to directly into the pockets of Bell TV, BCE’s direct-to-home satellite provider.

The rest is for the usual content, news, drama, culture, music, etc. etc. funding — the ‘cultural industries’ sop that the CRTC requires and that company’s on the prowl exploit to line up support for their take-overs from media workers, directors of Journalism and Communication schools across the country, and so forth. The result is greater media concentration blessed by the state with a few crumbs off the table for others with a stake in the game.

Others, with broader interests can go packing.   The CRTC fudges the language to conceal the fact that while vertical integration and media conglomerates are on the wane elsewhere, they’re on a tear here in Canada, despite the regulator’s supposed new rules limiting media concentration set into place in 2008.

Elsewhere, the crash in the value of the turn-of-the-21st century star of collosal-sized media conglomerates, Time Warner, wiped out nearly a quarter of a trillion in market capitalization, falling from an estimated worth of $350 billion in 2000 to $78 billion in 2009. AT&T also went belly-up in its aggressive move from the wires into all things media, only to be resurrected in 2005 when the moribund company was bought out by SBC. Vivendi Universal in France is another poster child of media conglomeration gone bad.  Others examples are as easy to pile up as leaves in autumn.

But here in Canada, in a manner akin to what takes place in oligarchic capitalist societies — think Russia and South America — giant media enterprises are again on the rise. Today’s blessing of BCE’s acquisition of CTV/CHUM (A-Channel) follows last October’s approval of Shaw’s take-over of the financial wreckage that was Canwest television, and at fire-sale prices to boot!

Of course, the trend is not all in one direction. Indeed, swimming against the tide, in the U.S., Comcast’s, that country’s largest cable provider, acquisition of NBC – Universal was approved by the Dept. of Justice and FCC (but also see Commissioner Michael Copp’s scathign dissent). Besides being exceptions to the rule, it is interesting to compare the US decision approving Comcast’s take-over of NBC with the CRTC’s decision to sanction BCE’s acquisition of CTV/CHUM.

In the US, the Dept. of Justice and FCC put fairly tough demands on Comcast to make its television and film content available to Internet competitors and ‘online video providers’ (OVPs), to adhere to open Internet requirements and to “offer broadband services to low-income Americans at reduced monthly prices; and provide high-speed broadband to schools, libraries and underserved communities, among other benefits” (FCC Press Release).

The CRTC, in contrast, will look at issues of vertical integration in a future set of hearings that it intends to hold on the issue in June.  Any of the other issues are not even on the table, or at least so it appears.

Well, another sad day in Canada. A great opportunity to articulate vision and to implement ideas and practices that could build one of the most open media systems in the world.  Instead, at the CRTC and in Canada’s media industries, it’s business as usual.

The Search for ‘New Media Models’

Here’s an interesting link to a talk given by Alan Rusbridger, the editor of the Guardian in the UK.  It offers a glimpse of how he, and the Guardian, see the emerging media environment. The tone that he strikes is interesting insofar as it is not one saturated with the ‘journalism in crisis’ trope, but rather the opportunities that exist as established models are forced to adapt to fast paced and relentless changes.

Rusbridger demonstrates an openness and understanding of media trends that appears well ahead of his counterparts in NA media.  He also fleshes out some of the potentials of a ‘collaborative model’ of journalism between the traditional media and new developments in social media, from WikiLeaks to Twitter. In this regard, he points to how the Guardian now casts itself not just as a newspaper publisher, but also a platform for OPC (other people’s content).

Finally, Rusbridger offer his thoughts on the way ahead not by throwing history and serious thinkers from the past overboard, but by embracing them. He discusses the continued threats of media concentration, highlights the undeniable dependence of most media on some form of subsidy, whether advertising, allocations for public broadcasters, wealthy patrons, etc. by drawing on Walter Lippmann’s 1922 classic, Public Opinion and waxes about the relationship between Raymond William’s observations from 1958 on communication and culture and conditions today.

In other words, media ownership and concentration, how stuff is paid for, and the relation of each to bigger questions about the kind of societies and cultures we currently live in, and those that we might imagine, are all given a serious nod.

Goldberg / Incumbent Report: Canadian telecoms — laggard or leader

This report by Canadian telecom economist and analyst, Mark Goldberg, takes aim at the growing perception that Canada has become a laggard in telecoms, internet and digital media policy generally.

I’m not sure exactly when it was written because it does not say.  While not buried altogether, the study, inconspicuously, acknowledges in footnote 2 that it is sponsored by several of the largest cable and telecoms giants in Canada: Bell, Rogers, Shaw, Telus, Cogeco and SaskTel. The source of funding behind the study is not suppose to be a big deal. Instead, the aim of the report, it states, is to ‘set the record’ straight.

For a study that takes a holier than thou attitude towards facts, this one is remiss in not even stating when it was commissioned and/or published.  The data is mostly vintage 2007 – 2009, but it is clear that it is intended to inform the heated debates now taking place in Canada. Mostly, it aims to replace the idea that rather than being a laggard, the telecoms and Internet industries in Canada, even if not a leader in anything, are not too bad either.  Its wishy-washy conclusions are meant to soften the case against Canada’s incumbent network providers for lacking in innovation, throttling the Internet, and dominating concentrated media markets.

None of these charges, it claims, are true.  But this is because, instead of dealing with actually existing markets and the real levels of competition/concentration in them, the Goldberg/Incumbent study invokes something called ‘intermodal competition.  This concept is fashionable amongst a minority of incumbent defenders and some economists.  This is not, however, competition between real players in really existing markets — i.e. the sponsors of this study — and their real share of these markets.  Instead, it refers to potential competition between different media technologies: cable, DSL/Telco lines, wireless, satellite. I have recently offered an overview of what things look like when we take actual market share into account (see here).  The conclusions are far different than the ones presented inthe Goldberg/Incumbent study.

Besides overlooking evidence on really existing markets, the study conveniently overlooks two other essential facts.  First, that the incumbent telco and cable companies’ serve 95% of the market.  Satellite and wireless technologies do account for some of the rest, but these technologies are not competitors to the incumbents, but adjuncts to, ahem, the operations of this study’s sponsors: Bell, Shaw, Rogers, Telus, Cogeco, SaskTel. Players in so-called MMDS wireless broadband Internet, notably Look, went belly-up a few years ago, although this too is ignored in this study. Thus, while most economists and regulators have thrown the ‘intermodal rivalry’ model overboard in the past few years, this study gives it pride of place.

The Goldberg/Incumbent study shadow-boxes with a 2010 study by Harvard U’s Yochai Benkler all the way through.  However, nowhere in the study is the Benkler Report mentioned or cited.  Here’s a link to that study.  It is far more comprehensive than this one, a product of an initial release in 2009, months of critique and revision before republication in 2010.  Unlike the Goldberg/Incumbent Report, the Benkler study is done by independent academics and is not sponsored by vested interests.

In contrast to the breadth of the sources cited by Benkler — OECD, ITU, Globcomm, Oxford University — Oveido University, etc. — across a much more comprehensive set of measures, the Goldberg/Incumbent study takes aim at OECD data, cherry-picks evidence from Stats Canada, the CRTC, Ofcom, FCC, etc. and relies on sources that are generally supportive of its position. Such supportive studies are well represented in those cited from, for example, authors affiliated with the Progress and Freedom Foundation as well as the Information Technology and Innovation Foundation in the U.S.

The Goldberg/Incumbent study relies heavily on a study by Scott Wallsten of Stanford U in the US.  It was originally done in 2008.  If scholarly citations are any measure of success, it’s 8 citations (according to Google) pale alongside the attention drawn by the Benkler Next Generation Connectivity report.  Throughout the Goldberg/Incumbent study, minor sources are put alongside more credible sources, as if putting them side by side makes them equal.

Wallsten does have an axe to grind. He is, among other things, a senior fellow at the Progress and Freedom Foundation, a libertarian think-tank that always lines up four-square behind ‘free markets’ and new technology every time, and is of the school that there was never a monopoly worse than State intervention. Wallsten’s study appears alongside references to others from the Information Technology and Innovation Foundation (ITIF), another group highly deferential to incumbent telecom and cable interests in the US, and deeply suspicious of government intervention.

The Wallsten paper as well as one presented by Robert Atkinson of the ITIF last year at the highly-regarded Telecommunications Policy Research Conference at George Mason U Law School (Arlington, Va) last year represent the stance of writers who are unavowedly in favour of incumbent driven broadband telecom and Internet development. It is also from such authors that the ‘intermodal competition’ concept versus real competition in the marketplace is borrowed.  The basic thrust of these authors, and of the Goldberg/Incumbent Report, is that, given enough leeway to do as they please, the dominant providers will invest sufficiently in networks for everybody who seeks it and at sufficient levels to meet consumer demand.

The lack of access in Canada, to the extent that it is a problem at all, is a ‘demand’ side problem, rather than a supply side one. Canadian prices are relatively affordable.  As the Goldberg/Incumbent study states, comparisons between advertised specials in Canada and the OECD reference study that it takes aim at shows that the OECD’s data is flawed.  It overstates the cost of high-speed Internet service in Canada, while under-stating the bandwidth, speed and other capabilities of Internet connectivity in Canada.

The problem with this conclusion is, first, taking the OECD data as the main referent points selectively picks from one study among the wide range of studies available.  Second, taking ‘best advertised prices’ for Internet services currently available on ‘the market’ is silly.  This is because such ‘specials’ come and go; they also expire after the promo period, followed by lock-in periods, and penalties for early withdrawal.  All of these things, as Timothy Wu pointed out nicely in a recent Globe & Mail article, basically extend the same loathed practices of the cellphone carriers (who, again, are one and the same as those sponsoring this study) to the Internet.

This is to say nothing of acceptable user policies that contain more limits on what people can and cannot do with their connectivity than could be admitted in the most draconian of states with even a hint of pretense that people’s freedom of expression and privacy rights deserve respect. Far beyond bandwidth caps and so-called over-usage charges lay the assertion by carriers of broad editorial authority over users content, ownership of user-created content, limits on the ability to attach certain devices (servers) or run certain applications (news feed, multi-user processes, etc.), the right to use deep packet inspection technologies to manage communication flows, and so on and so forth.

In the Goldberg/Incumbent report, these concerns are dealt with and dismissed in chapter five, which covers issues of network neutrality, government intervention and the potential for government ownership of broadband Internet providers. Network neutrality is, states the report, a kind of propagandistic, populist ploy — i.e. who can be against something that is ‘neutral’ — and the CRTC is praised for being wise enough to have rejected the terminology in favour of the, ahem, really neutral language of “Internet Traffic Management Practices” when these issues came to a head in 2008-9.  Vertical integration, economies of scale and scope, and the leeway to devise whatever ‘business models’ they desire are the keys to success, according to the report.

A less beholden report might point to Jacques Ellul and a different kind of propaganda: one that puts you to sleep by obscure language and a mountain of technical detail that makes your eyes glaze over and your brain go to sleep.  That is the language of the CRTC, this report, and those who want to junk not just the language of Network Neutrality, but the principles and values that it stands for.  Funny thing is, I don’t much like the concept of ‘network neutrality’, either.  This is because I prefer common carriage and the history of that concept, largely because it reminds us that common carriage was the status quo for most of the 20th century and was sp because it is generally a bad idea to let those who control the medium to control the messages flowing through it.

The Goldberg/Incumbent report is right that economies of the scale are propelling a certain sense of scale, or bigness, and that this can sometimes be good for investment.  However, while digitization magnifies economies of scale for certain things, claims regarding economies of scope as justification for the creation of fully integrated media conglomerates are mistaken.  Moreover, even if bigness was the result, that might be reason to step in to turn back the tide.

All of the major incumbent telecom and cable companies now systematically regulate the contents flowing through their pipes. The question is whether this is only for some ‘peak’ hours of the day (Bell) or all day long (Rogers)? Bell’s abysmal experience with so-called convergence between 2000 and 2006 should give us little comfort in its ability to run CTV today. The fact that bandwidth caps and UBB tilt the playing field against Netflix, Apple TV and amateur video (YouTube) alike just at the time the companies are ramping up the presence of their on online video services is indication enough that the marriage between the medium and the message gives an inherent bias to the incumbent’s to discriminate in favour of their own services and against those of others.

While this is the case for Bell, Rogers, Shaw, Videotron and Cogeco, for example, the examples of Telus, SaskTel, MTS, Bragg Cable, etc. shows, and indeed others around the world, that there is no reason for those who own the pipes to also own television programs, music, films and other ‘content’.  AT&T in the US and Vivendi in France showed the folly of this earlier this decade and in the late-1990s. Most of the US major telecom players no longer are tightly aligned with Hollywood, as they were in the mid-1990s, and haven’t been in the last 10 years.

Lastly, the Goldberg/Incumbent report claims to not be for anything one way or another when it comes to government intervention, but the thinness of that claim is readily transparent.  There is a sense of urgency underpinning the report regarding what it seems to see as darkening political clouds on the horizon.  It applauds the Government’s willingness to intervene to set back CRTC decisions that run opposite the incumbents (e.g. Globalive), but elsewhere cautions that the slightest of intervention in Canada’s telecom and Internet markets will deter investment, respond to problems that don’t really exist, and worse.

Chapter five in the Goldberg/Incumbent report seems to see the potential for extensive government intervention along the lines adopted in Australia, Korea, Japan, Sweden, Britain, NZ, and a whole lot of other places as a possible doomsday scenario if it ever took hold in Canada. Australia’s decision in 2009 to develop the National Broadband Network Company to bring ‘next generation networks’ to nearly 95% of Australian homes is seen as being born of conditions so different than those in Canada that it is not even worth discussing anything similar in Canada.

At separate places in the report, the Australian venture is stated as involving an investment of either $31 billion or $43 billion. The original announced amount was the latter. Either way, the amount is indeed significant — the biggest public works project in Australian history, actually. However, for a report that is holier than thou about numbers, small errors when it comes to basic figures raise questions about the analysis in the report as a whole.

While the Goldberg/Incumbent report tries to place Canada along side the US in terms of approaches to ‘stimulus spending’ on broadband Internet development, the current government’s pledge of $225 million over the next few years to bring broadband Internet development to rural communities pales alongside the US’s plan to spend $7.2 billion on such initiatives, or Korea’s $24.6 billion or Australia’s $43 billion.

If it is Canada’s low population density and sprawling landmass that is responsible for any lags in Canada’s network development, as this report so often claims, than we would expect that investments to overcome these obstacles might be higher by international standards, not lower. The fact that Britain, a country with twice the population but a fraction of the landmass, is spending $830 million, or more than 3 times Canada, suggests that the link drawn between population density and the cost of network development is overblown in the Goldberg/Incumbent report. In fact, this attempt to shift the debate onto the terrain of geography and demographics is a red-herring. This is because a huge proportion of us live in relatively small number of large metropolitan cities (Toronto, Vancouver, Montreal) and then along a thin band running parallel to the border.

Overall, the Goldberg/Incumbent report diverts attention from many of the key issues and suggests that, all things considered, we’ve got it pretty good in Canada. Competition between technologies is substituted for real competition in the market place. Weak data sources are made the equivalent of good ones. The time and source of this study itself are either missing or buried in a footnote.

Overall, the Goldberg/Incumbent Report is part of the oncoming onslaught to hold back the ‘populist’ and political tide that has once again risen to the fore and demanded a more open, competitive and free media system. The report applauds the Government for holding back that wave so far and avoiding the populist path (see page. 55). That says much about its own political stripes, despite its attempts to cloak those stripes behind a veil of neutered facts and sterile language.  We will see many more of these kinds of initiatives in the upcoming days, weeks and months ahead.

Ottawa Globalive Appeal: Open Network Fans Should Beware the Strong Arm of the State

In several of my previous posts, I talked about the current Government’s penchant for intervening in the CRTC’s affairs and bringing about policies that it had been unable to do by normal routes. I have also argued that such interventions have played a crucial role in transforming the Internet from a user-controlled and open model to a provider-controlled, pay-per medium.  Without any formal changes in policy or law, the Internet has been changed beyond recognition. All the while, the Government sings from the rooftops that it is the champion of competition, innovation and the consumer.  It is doubtful that it is any of these.

In December 2009, the Government stepped into reverse another decision: this time it was the CRTC’s decision to reject Wind Mobile’s bid to become a new player in the Canada’s notoriously uncompetitive and technologically backwards wireless industry that was over-ruled.  Wind Mobile was rejected because most of the cash behind the company came from an Egyptian company, Orascom, and while most of the directors would be Canadian, the CRTC ruled that ownership conferred control in fact. The bid was not in synch with Telecommunications Act’s restrictions.

Foreign ownership has been a perennial issue in Canada, and especially in the last decade or so.  While the discussion has been endless, there has been no decision by the Canadian government to change the law.  The Industry Minister’s decision in 2009 to over-rule the CRTC and green-light Wind Mobile was essentially an attempt to change the law by stealth.  The introduction of Wind Mobile was no doubt a much needed shot in the arm for an anemic industry.  Yet, doing end runs around the law and ramming the Government’s choices down the regulator’s throat is not the proper way to do this; either a change in the existing Telecommunications Act or a new law altogether is the right way to go.

The Order in Council overturning the CRTC in the Wind Mobile was declared illegal on February 4, 2011 by a Federal Court. Industry Minister Tony Clement served notice on February 15th that the Government is appealing the court’s decision. This will certainly keep Wind Mobile on life support for a while, but it will do nothing but delay action on foreign ownership.

The problem in all of this is that we have policy by stealth and hand-to-hand combat. This is the strong state in action, and the state, to paraphrase Napolean, is Harper.  Clement’s announcement of the appeal was also accompanied by a statement meant to counter charges that it has been playing heavy-handedly with the CRTC. That is a point that I’ve been making in the past several posts. Clement wasn’t responding to me, however, but to comments made by former Liberal appointed chairwoman of the CRTC, Francoise Bertrand and another former vice-chairman of the agency, Richard French.  Both have argued in the past few weeks that such constant meddling is deeply politicizing the regulatory process and rendering the telecoms environment opaque and chaotic.

Bertrand has been denounced by Open Media and P2P.Net as an industry hack and well-connected spearhead of Quebec industry, including Quebecor (Sun Media, TVA, Videotron), where she is a board of director.  Undoubtedly, her interests are aligned with her corporate masters, but at least in this instance being against the Cabinet Directives in either the CRTC’s UBB or Wind Mobile doesn’t put you on the wrong side of the issue.

Open Media and P2P.Net’s, among others, push for much greater competition and an open Internet are indeed worthy goals, and I’m fully in support of them.  These groups have been instrumental in fomenting opposition to the recent UBB decision. On the issue of Cabinet Directives, however, Bertrand is right.  Regulation on a short leash is deeply problematic, and while it may get what we wish for with respect to the UBB decision and Wind Mobile, it is not the way to create a real competition, diversity and open media. In fact, it is the exact opposite. We should be leery of relying on the strong arm of the state to bring about ends that we might seek.

That Bertrand was on the mark is reflected in the fact that Clement directly took aim at her charges by trying to repudiate them when announcing that it would appeal the Federal Court decision on Wind Mobile (Globalive).  Indeed, an essential paragraph in the announcement aimed to give the impression that the Government has only meddled modestly in the CRTC’s affairs:

“Since 2006, the Canadian Radio-television and Telecommunications Commission has issued approximately 2,200 telecommunications decisions. During this period, there have been 13 CRTC decisions that have been formally reviewed by the Governor in Council. Of those, the Government has upheld seven decisions, varied three, and referred three back to the CRTC for reconsideration.”

In fact, however, 13 interventions into the CRTC’s telecoms decisions within five years is a lot. From 2001 until 2005, governments of the day intervened 7 times, in the five years before that 8 times, and between 1990 and 1995, just 4 (see Privy Council Office’s Order-in-Council database). Matters are different (in many ways) for broadcasting, but in the matter of telecoms, this is the strong state in action.

So, make no mistake about it, 13 interventions in the past five years is high. The CRTC has been put on a short-leash.  The use of Cabinet Directives has consequences that are sometimes ambiguous, and some that are good for competition (Wind Mobile), but it has also deterred greater competition in services, blocked speed-matching for ISPs, encouraged greater deference to incumbents’ investment plans and business models, and opened the door for UBB.  The crumbs off the table that may accrue from the Government’s likely overturning of the January 25th UBB decision by the CRTC, unless the agency beats them to it, are not even close to making up for such strong intervention into media matters.

Those who think that the Government’s directive-happy instincts can opportunistically be turned to their own advantage, I believe, are going to wake up very soon to find that they are sadly mistaken.

Telecom History and the Internet

I remember the puzzled looks from people back in the late-1980s and early-1990s when I told them I was studying telecommunications.  They looked perplexed. Why the hell would anyone want to study wires, switches, telephones. Boring!

It was indeed a bit of a hard sell. The history of telecoms, though, teaches us much about contemporary developments, not least those related to the Internet. In the previous post, I mentioned how Australia, in 2009, created the National Broadband Network Company in the face of incumbent obstruction. I also indicated that, worldwide, a dozen-and-half governments have earmarked $71 billion to extend next generation broadband networks to the doorstep, and to poor, rich urban and rural folk alike. I also referred to how Ofcom broke-up BT in the UK in 2005/6. Faced with all of this state intervention, the Paris-based consultancy, IDATE, wonders if we are witnessing the ‘renationalization’ of telecoms?

I don’t think so. All of this activity does, however, remind us of the role of politics and popular discontent in all things telecoms. Public uprising over the perceived under-development of communication networks, excessive rates, neglect of the rural and the poor, and so forth are not unique to the Internet. In Canada, they go back at least to the telephone in the late-19th and 20th centuries, and arguably to the telegraph and post office before that. Old media become the content of new media, as McLuhan once put it, warts and all.

In Canada, public outrage with the perceived under-development of the telephone system led to the Mulock Committee Inquiry in 1905. Hundreds of testimonies and piles of evidence later, the committee’s report seemed to fall on deaf ears. But in the next three years between 1906 and 1909, the Alberta Government Telephone System (1906), Manitoba Telephone System (1908) and SaskTel (1909) were created.

The public interest was not a phantom idea at this time.  Instead, it was the sum total of the expressions found in traces 0t the Mulock Report, journalism and what people were saying about the existing state of affairs and how they felt things ought to be. The under-development of communication networks not only sparked public discontent and political revolts, it spawned a legion of independent ‘network providers’ — some were state-owned, others were entrepreneurial, many were rural cooperatives, not a small number were municipally-owned (Thunder Bay Telephone).

Five years after Mulock (1910), the Board of Railway Commissioners (BRC) also stepped into the fray, this time to slay a loathed ‘double-headed news monopoly’ between the Canadian Pacific Telegraphs (to the west of Montreal) and the Western Union Telegraph Co. (with lines from Montreal to the Atlantic provinces and Nfld), on the one hand, and the NY-based Associated Press, on the other.  The two telegraph companies jointly held exclusive distribution rights for the Associated Press news agency in Canada. By ‘bundling’ the cost of transmission (the medium) with the cost of the news service (the message), they drove every potential rival news service out of business.

The monopoly over the wires, in short, conferred a monopoly over news. The impact on journalism was considerable, but indirect and hard to calculate.  The BRC, a long lost distant cousin of the CRTC, nonetheless nipped the operation in the bud.

The history of telecoms in Canada has much to teach. In this instance, these two examples teach us that the public interest is real, that public ownership is a potential, and that there is good reason to be concerned about letting those who control the medium control the message. Sections 27 and 36 of the current Telecommunications Act (1993) preventing those who own the wires from giving undue preferential treatment to their own services and from exercising editorial control over the messages transmitted through their networks are the legacies of this history.  The narrow choices that are being made about fundamental issues today is a matter of political expendiency and a denial of that history.