Cross posted from Carleton University homepage.
Well, this is a bit of a cheat, but Steven Reid at Carleton University did such a great job conveying the central message of a new report that we put out at the Canadian Media Concentration Research Project that I thought I’d just crib the whole thing and re-post it here. Thanks Steve.
Steven’s wordsmithing follows:
Carleton University’s Canadian Media Concentration Research project, directed by Dwayne Winseck of the School of Journalism and Communication, has released a report entitled Mobile Wireless in Canada: Recognizing the Problems and Approaching Solutions. The study outlines the state of wireless competition and concentration in Canada in relation to 57 countries worldwide, covering a period of three decades.
“The deep divide between the wireless industry and the government that has erupted over the latter’s attempt to reduce domestic and international roaming charges and foster more competition is the focus of the study,” said Winseck. “The study challenges the industry’s claim that there is no competition problem in Canada and emphasizes the importance of maverick brands that extend the market to those at the lower end of the income scale – women and others who are otherwise neglected by the well-established wireless players.”
The report supports the assertion that mobile wireless markets in Canada are not competitive. It offers a comprehensive, long-term body of evidence that places trends in Canada in an international context. The study shows that Canada shares a similar condition with almost all countries that were studied: high levels of concentration in mobile wireless markets.
The difference between the wireless situation in Canada and elsewhere is the lack of resolve to do anything about this state of affairs said Winseck. The study concludes that Canada’s situation is not promising, although there are some bright spots on the horizon.
“For the time being, the tendency is to deny reality, even when incontrovertible evidence stares observers in the face,” said Winseck. “This, however, is symptomatic of a bigger problem, namely that in Canada the circles involved in discussing wireless issues are exceedingly small and they like to hear the sound of one another’s voices. Their members do not look kindly on those who might rock the tight oligopoly that has ruled the industry from the get-go.”
The study highlights the importance of emerging maverick brands like T-Mobile in the U.S., Hutchison 3G in the U.K., Hot Mobile and Golan Telecom in Isreal, and Iliad and Free in France.
Maverick brands have many things in common:
- All have faced aggressive incumbents and they tend to disrupt the status quo, pushing down prices, driving massive growth in contract-free wireless plans and unlocking phones.
- They have relied on the state for a fundamental public resource that underpins the entire mobile wireless setup: spectrum.
Incumbents have fought against new wireless companies, challenging governments in an attempt to preserve their domination of the spectrum. In Canada, three companies currently hold 90 per cent of the spectrum: Rogers (41 per cent), Telus (25 per cent) and Bell (24 per cent).
The study shows that compared to the countries included in the study:
- Wireless markets in Canada, regardless of how they are measured, are remarkably concentrated;
- Canadians are first in terms of time the spent on the Internet, GBs of data uploaded and downloaded, smartphone data sent and received etc.;
- Canada is highly ranked when it comes to capital investment in its wireline infrastructure, but lags in wireless investment.
“Whether or not people get the media, wireless and Internet capabilities they need to live, love and thrive in the 21st century depends on making the right choices now,” said Winseck. “Those choices are staring Canadians in the face. How we act, and how our government moves ahead, will set the baseline for how mobile wireless media in this country will evolve for the next two decades – the length of the licences being awarded in the upcoming 700 MHz spectrum auction – and probably for a lot longer than that.”
An executive summary of this study can be found at: http://www.cmcrp.org/2013/11/18/executive-summary-the-cmcr-projects-wireless-report-mobile-wireless-in-canada-recognizing-the-problems-and-approaching-solutions/
The full report can be viewed at: http://www.cmcrp.org/wp-content/uploads/2013/11/Mobile-Wireless-in-Canada2.pdf
In the middle of last week the CRTC began to solicit views on whether or not a national code for wireless services is necessary. The CRTC had received several applications, it said, suggesting that such a code might be needed.
Who might want such a code? The big wireless providers, Rogers, Bell and Telus, that’s who, and their lobby group, the Canadian Wireless Telecommunications Association.
Why? Because they’ve been facing mounting efforts at the provincial level to more strictly regulate their pricing and service packaging. Ontario, Manitoba and Quebec have been leading the way (see here). Rabble rousing Openmedia also has the wireless industry in its sights with its “stop the squeeze” campaign (also see the Open Media/CIPPIC study here). A standard code generated by the industry could help dampen the clamour.
In its notice, the CRTC wondered aloud about whether its reliance on competition to the maximum extent possible in wireless, and its decision way back in 1994 to not regulate the sector, might be misguided in light of stubbornly low levels of competition. Anybody who thinks the regulator should actually do something has to (a) show the circumstances have in fact changed and (b) that this change represents a turn for the worse. Only then will the CRTC intervene.
And if does intervene, what can we expect? Not real regulation, but rather a “national code for wireless services” designed by and mostly for the industry.
So, have things changed? Well, yes, of course: 2G, 3G, now 4G and LTE. Smart phones are increasingly making their ways into the palms of Canadians across the land. The internet of devices is highly wifi dependent, and mobile data and video use is growing fast. The industry has also grown from a $3.7 billion industry in 1996 to $18 billion in 2010.
However, one thing that has stayed constant is the fact that the wireless services have never been truly competitive and likely never will be. Nor, however, is it necessary that we expect them to be. But the CRTC said that it would need evidence to indicate that market forces are not working before it would act.
Let me introduce two such indicators: one, the empirical evidence on the state of competition and concentration in the wireless sector between 2000 and 2011 and, two, some indicators of price and quality drawn from relevant global standards.
1. Competition and Concentration: In 2000, the big three wireless providers — Bell, Rogers and Telus — accounted for just over 87% of the industry. Today, they account for just over 93%. The “big three” control more of the sector than ever, and besides that Rogers and Bell now straddle every other significant segment of the telecom-media-internet industries. What they do in any one of these areas affects the developments elsewhere, and broadband wireless services in particular.
The wireless industry was already highly concentrated in 1994 when the CRTC decided that the market was competitive enough to stop doing what it’s suppose to do: regulate. Competition did increase modestly during those early years, with two new rivals – Clearnet and Microcell — snatching away 12 percent of the market away from the incumbent telcos and Rogers by 2000. The two rivals were short-lived, taken over by Telus and Rogers in 2000 and 2004, respectively.
Competition peaked in 2000, then the sector became sharply more concentrated by 2004, before falling slightly and staying relatively flat ever since. Whether recent newcomers — Mobilicity, Wind Mobile, Public and Quebecor – will fare any better, it is still too early to tell. With only 2.7% of the market as of 2011, they are far off the mark set at the high-point of competition in 2000.
The graph below charts the trend between 2000 and 2010 using the Herfindhahl – Hirschman Index (HHI). Remember, the basic rule with the HHI is that scores under 1000 indicate reasonable competition, 1000-1,800 moderate levels of concentration and anything over that, high levels of concentration. They’ve been over 3000 for most of the decade.
HHI scores for the Wireless Sector, 2000 – 2010
Sources: CRTC’s Communications Monitoring Report for 2008 and 2010, and the Telecommunications Monitoring Report from from 2000 to 2007, Canadian Wireless Telecommunications Association’s Wireless Phone Subscribers in Canada.
While there’s room for interpretation, the bottom line is that the wireless sector is and always has been highly concentrated. It is less competitive now than it was in 2000, when ‘market forces’ peaked. The CRTC is right that after this length of time, and in the face of the immovable reality of high levels of concentration, yes, maybe it is time to temper the ‘maximum reliance on market forces’ mantra. A code may just be in order, although one might go even stronger and ask for proper regulation, i.e. for the CRTC to do its job versus playing overseer to an industry-developed code.
2. What about Prices and Quality?
In terms of prices, we can look at things charitably and not so charitably. First, we can look at the CRTC’s data for information on pricing for wireless services, but we’d look in vain. The best I can see is a combined price index for wired and wireless telephone service in comparison to the cost of cable and satellite services as well as Internet access services. The figure shows the trend below.
Source: CRTC (2011). Navigating Convergence, p. 65.
Seen from this angle, things look not too bad, at least between 2002 and 2007, when prices were falling below the level of the general consumer price index. The situation reversed after that, however, with the price of wireless services rising relative to the cpi since 2007. Prices have not risen as fast as in cable and satellite subscriptions, but they have not fallen to nearly the extent as they have for Internet access.
We can also look at this relative to seven other countries that can be meaningfully compared with Canada. As the following figure drawn from the UK regulator, Ofcom, shows, the amount that Canadians pay to their wireless provider each month is at the high end of the scale and always has been throughout the period covered. Also note that prices in every other country surveyed, except Australia, have been falling, while in Canada they’ve been on the rise.
Source: Ofcom (2011). International Communication Monitoring Report, p. 256.
We can also look to the OECD for some guidance. In terms of wireless broadband access per 100 people, Canada ranks 26th out of 34 countries. The following chart shows the comparison.
Source: OECD (2011). Broadband Portal.
Of course, there’s much more that could be said, but just from a cursory glance, all is not right in the wireless kingdom. Of course, many seem to think that opening up foreign investment is the way to go. As I’ve said before, I’m not so sure. Now is not exactly the high-tide of foreign investment in mobile services, at least in the Euro-American economies. And many of those same sources seem to have the US in mind when they hope that big foreign investors will come in to save us from the rapacious grip of Rogers, Bell and Telus. I’m afraid, however, as Susan Crawford, amongst others observe, the US is no better than here, and even more of a basket case on some measures.
The upshot of all this: wireless will likely never be competitive. The CRTC needs to regulate versus oversee an industry-developed code. Lastly, instead of auctioning off all the spectrum, Industry Canada should look to develop an open wireless model.
Crony Capitalism?: Revolving Door between Telecom-Media-Internet Industries in Canada and Ex-Politicos
Where do ex-politicians go when they retire? It would appear that they take up sinecure amongst the boards of directors at Canada’s leading telecom-media-Internet (TMI) companies.
The appointment of recently retired Industry Minister Jim Prentice to Bell Canada’s board of directors and Stockwell Day’s appointment to Telus, respectively, in the last two weeks has tongues wagging. Many think it ain’t right, others see no problems; I see it as business as usual, systemic and a big problem that contradicts the ideals of a free press and any notion that TMI policy in this country is anything more than industrial policy and a major industry player protection racket.
Of course, not everyone sees things this way. As one lobbyist from the software industries in Canada badgered me over the weekend on Twitter, what’s an old political hack suppose to do when they leave office? What’s wrong with Prentice and Day taking up shop at Bell and Telus?
Well, lots. If it was just Prentice and Day stepping from the halls of Parliament to paneled boardrooms of Corporate Canada, perhaps it would be exceptional and not much to be worried about. However, if we look at the boards of directors at the top ten TMI players in Canada, we see that they are not the exception but the rule. The boardrooms are brimming with their type, with a total of fourteen directors – an ex Prime Minister (Brian Mulroney at QMI), an ex-first lady (Mila Mulroney at Astral), two former Chairpersons of the CRTC (Francois Bertrand at QMI and Andre Bureau at Astral, and more, as the chart below shows – occupying these coveted spots.
Top 10 Telecom-Media-Internet Companies and the Ties that Bind
|Ownership||Politicos as Directors||Family Members as Directors||Links With Other MediaCos|
|Astral||Greenberg||Andre Bureau (CRTC chair)||
|Paul Godfrey (PostMedia)|
|Mila Mulroney||Phyllis Yaffee (Dir. Torstar)|
|Bell||Publicly Trade (Diversified)||Jim Prentice (Cons. Ind. Minister)||Not Relevant|
|E. C. Lumley (Lib. Cab. Min)|
|Carole Taylor (BC Fin Min)|
|PostMedia||Godfrey (6.5%)||David Emerson (Lib. Cab. Min)||
|Quebecor||Péladeau||Brian Mulroney (Cons. PM)Francoise Bertrand (Chair CRTC)Kory Tenycke (VP Sun News, ex Harper Dir. of Communication)||
|Rogers||Rogers||John H. Tory (ex. Ont. PC leader)David Peterson (ex Lib Premier Ont.)||
|Issabelle Marcoux (Transcontinental|
|Shaw||Shaw||Sheila Weatherhill (PM Advisory Cmmt on Public Service)||
|Torstar||Atkinson, Thall Hindmarsh, Campbell, Honderich||Roy Romanow (ex Premier of Saskatchewan)||
|Phyllis Yaffee (Dir. Astral)|
|Globe & Mail||Thomson (65%)||
|Telus||Publicly Traded Diversified||Stockwell Day (ex CPC Cab. Minister)||Not Relevant|
Sources: Corporate Annual Reports and Forbes Corporate Executives & Directors Search Directory <http://people.forbes.com/search>
Things are particularly strange in Canada by the added fact that eight of the top ten TMI companies in this country are family-controlled. This degree of media mogul control and political ties to the inner sanctums of top media companies is reminiscent of an ‘ancien capitalism’, where families and the ‘political class’ are in charge rather than citizens and ‘expert’ managers at the helm of publicly-traded firms where ownership is dispersed and corporate operations transparent.
Things are different in the US, where Eli Noam points out in his authoritative Media Ownership and Concentration in America that the number of owner-controlled media firms fell from 35 percent to just 20 percent between 1984 and 2005 (p. 6). I think that Noam slightly exaggerates the decline given that five of the top global media conglomerates — Comcast (the Roberts family), News Corp (Murdoch family), Viacom-CBC (Redstone family), Bertlesmann (remnants of Bertlesmann and Mohn families) and Thomson Reuters (Thompson family) – are of this type. Moreover, the media baron still cuts a large figure at the top ICT and Internet companies to, think: Apple (Jobs), Facebook (Zuckerberg), Google (Page, Brin and Schmitt), Microsoft (Gates and Ballmer), Yahoo! (Yang), IAC (Diller and Malone) and CBS (Redstone).
The ongoing case of the telephone hacker scandal in the UK reminds us that with the Murdock family – Rupert and his son James – at the helm, we are far from the end of the era when media moguls ran supreme. Thus, while not totally unusual, the degree of ties between moguls and political appointments at Canada is of a different kind and more extensive. Such arrangements are backwards, if you will, and more like nations with a tradition of oligarchic capitalism, as in Russia and Latin America, then in the liberal capitalist democracies of the US and Europe.
It is not that we just have an outmoded system of family control with ex-politicos having positions of influence right across the ranks of TMI sectors, but also that the main players have ownership stakes in one another’s companies, as is the case with Rogers owning about a third of the equity in Cogeco and Bell a residual 15 percent stake in the Globe and Mail.
Also blunting the sharp edge of competition and independence between different players in the market is the fact that directors on the board of one company sit on the boards of supposed rivals. Phyllis Yaffee, an industrial stalwart with oodles of experience and one who actually does have the expertise and savvy to fill a directors’ shoes is on boards at Astral and Torstar. Paul Godfrey, also an old hand and savvy operator in the business, sits on the boards at Astral and PostMedia Co. — the company a company that he has spearheaded the development of to assume ownership of the twenty odd newspapers (Ottawa Citizen, Windsor Star, National Post, Calgary Herald, Montreal Gazette, etc.) left behind by the wreckage of Canwest. That wrecked vassal is yet another company that was family controlled (the Aspers) and not shy about stacking its board with ex politicos (e.g. Derek Burney, ex. Chief of Staff for Harper).
We also, as I have said repeatedly in this blog and elsewhere, a very highly concentrated set of industries. Altogether, the big 10 firms listed in the table above account for just under three quarters of all revenues in the TMI industries (excluding wired and wireless telephone services). I think the two are related.
It is not just that all our TMI industries, individually and as a whole, are very highly concentrated, but that policy and regulation in this country does not deal with this fact. Instead, policy-makers and regulators, to a large degree, cultivate concentration on the grounds that whatever problems this raises will be offset by industrial gains.
As David Ellis pointed out the other day, the CRTC does not regulate the TMI industries on the basis of any known standards of market concentration, but functions primarily to grease the supply-side of the industrial machinery that make up the TMI sectors.
The problem is not just that this leaves consumers and citizens on the sidelines while industry calls the shots. The problem is that the phenomenon of politicos on the boards of directors at the major TMI companies, and the revolving door between the regulator and government policy-shops on one side and industry on the other are pervasive, enduring and systemic.
What this means is that we cannot just look for one-off instances of influence peddling, as in, say, the allocation of spectrum in past and forthcoming wireless auctions, as Peter Nowak points out. Nor is that putting Harper’s former Director of Communication, Kory Tenyecke in the position of VP at QMI’s Sun News will leave a dirty trail of finger prints on every story covered, with lurid tales of stories spiked and stories spun to favour Harper and the Conservatives.
To be sure, a few cases of such things will happen, with one or two leaking out to become grist for the mill and confirming some people’s worst fears. The problem is deeper than that, however, and less easy to suss out in terms of what it all means. However, as I showed during the election this year, it is true that of the twenty-two papers that issued endorsements for Prime Minister in the last election, all but one stood foursquare behind Harper — a wall of Conservative editorial opinion behind the Conservative candidate for PM.
Yet, the meddling hand of direct owner or political influence is much more subtle, and rarer than this. Instead it takes place at two more general levels: corporate policy making and the allocation of resources, say, resources for faster Internet connections, more journalists and coverage of world affairs and the environment versus cut-backs, low levels of investment and fluffy content to titillate and instigate bickering rather than understanding and civil discourse. It is at this general level that directors hold sway. Indeed, that’s what they’re hired for, to set long term policy and make sure that those directly controlling the purse-strings do so wisely.
Beyond this, the real problems are three-fold: First, the revolving door between regulator (CRTC) and those who make the rules while in government, on the one hand, and the TMI companies, on the other, institutionalizes an approach to media policy as industrial policy and a strategic game. The extent of this also means that everybody in the game must adopt a similar strategy, which only aggravates the problem and makes things all the less apparent in terms of who and what is really calling the shots.
Consequently, regulation and policy-making is not so much about guiding the development of telecom, media and Internet in relation to democratic and free press values but industrial policy concerns. As I stated earlier, the CRTC serves principally to grease the supply-side machinery of these industries, rather than regulating in the public interest or in relation to a broad understanding of how people actually use media facilities and what we want. Perhaps this is not surprising, given that the last known sighting of the CRTC’s old motto, “communication in the public interest”, was in December 2008 (see here). It has disappeared from the top of its webpage and prominent place on the front of publications ever since. No wonder some commissioners and the vice-chair have a hard time understanding the link between media and democracy.
Such arrangements are an affront to common sense and to principles of a free press in liberal capitalist democracies. They smell bad and smack of crony capitalism unfit by even the standards of liberal capitalist democracies.
Finally, they fly in the face of liberal theories of a free press. According to classical theories of the free press, and especially Whig tales of press history from the rise of advertising-funded mass media in the late-19th and early-20th centuries, the media are suppose to be independent of government. They are also to serve as a watchdog nurturing the public sphere rather than as waiting lapdogs for retired politicos in the hope that they can tilt the industrial policy-making game in their new masters’ favour.
A reader, Sean, sent me an email yesterday, two actually and a couple of questions. They reminded me of something, and then inspired me to read and write. Thanks Sean.
The immediate point was that Shaw Media and Telus are about to ramp up bandwidth caps and UBB — the cornerstones of the the pay-per Internet model — in western Canada. To be sure, people in Alberta and BC have already had lots of this model already.
However, while both Shaw and Telus have had ‘bandwidth caps’ and UBB on the books, they have not used them. That looks set to change.
Shaw appears to be first off the mark in wanting to kick these into action, as it told, again, those pesky investment bankers who are now hovering around companies because it is the ‘end of quarter’ reporting season of its plans. As Shaw stated, it has the market power to impose the pay-per pricing model and supposedly the consent of its users. I don’t doubt the former, but the latter claim is circumspect.
Shaw has come full circle in the past sixth months after acquiring Global TV and has begun to sing a new gospel from the top of its lungs in favour of regulating OVP (online video providers) such as Apple TV, Google, Netflix, etc..
Telus, too, has had pretty tough bandwidth caps and UBB on its books. It’s cost per ‘extra’ GB when going over the cap is a punitive $2-5. Telus infamously shut down access over its ISP to the website “Voices of Change”, a site run by the Telecommunication Workers Union, during a strike in 2005.
It has been no angel. However, I am also reminded that amongst the ‘big six’ — Bell, Shaw, Rogers, Quebecor, Telus and Cogeco — Telus is something of an exception, or at least has a few characteristics that distinguish it from the others and put it on, as my friend Marc-Andre put it, “the side of the angels”. We should probably give credit where credit is due.
First, we must remember that in a situation where Canada stands unique, if not completely alone, in the universal coverage of ‘bandwidth caps’ and pay-per GB ‘excess usage charges’, Telus has not yet made the move to implement these measures and might yet be dissuaded. So, for what that’s worth: Telus, please don’t be evil.
Second, on some key ‘structural issues’ that go to the heart of the organization of the network media in Canada, Telus stands alone amongst the ‘big six’ for not following the path of ‘empire’ by becoming vertically-integrated with a dominant broadcaster. This means that its voice has been absent among all of the others who have called in unison for the CRTC to regulate online video providers.
Third, Telus recently told the Standing Committee on Canadian Heritage in no uncertain terms that it opposed the Shaw-Global TV and Bell-CTV amalgmations, respectively. In sum, Telus has not embraced the shangri-la of ‘media convergence’.
That, however, does not mean that it is not in the TV business. It serves as distributor of Bell satellite TV in the west. It has its own IPTV service, mobile tv channels, and so forth. It needs programs and ‘content’ for its IPTV service, mobile tv channels, and so forth as well, and therein lies a problem.
Telus already claims to be having a lot of difficulty getting the programming that it wants on reasonable terms. This is more grounds for its opposition to vertical integration still. For that reason, Telus will stake out a unique stance at the upcoming CRTC hearings on vertical integration in being the only major incumbent likely to argue on behalf of some form of structural separation. This is a good thing and, again, Telus is on the side of the angel
Having just been blessed by the CRTC (and Competition Bureau) over the past six months, it is hardly likely that the CRTC will do much more than tinker around the edges with vertical integration. The fact that Industry Minister Tony Clement has already voiced his view that vertical integration is the way of the future and structural separation irresponsible only reinforces the impression.
All of this reminds me that the commitments to open networks is not about paying homage to abstract principles but to a concrete trilogy of real considerations: open networks, open sources and open societies. At the present conjuncture, each is under severe pressure, but yet to be bowed.
While no angel, Telus is on the side of the good with respect to open networks and should be applauded to the extent that it is. In terms of open source, the approach helps generate ideas, examination and conversation like Sean’s email did yesterday. Several others have written lately too, so thanks, but I would also like to suggest that it is best to raise issues here. That way others can weigh in, and go off on their own, too.
These are also the things upon which an open society — the ultimate endpoint of the trilogy to begin with — depends. There are important questions about just how far Canada has fallen from that standard.
We have corporate disclosure rules that pale alongside those in the United States. Not just the major network media conglomerates, but publicly-traded corporations in Canada generally disgorge far less information to the CRTC and Competition Bureau than their counterparts in the US are required to do by the FCC and Department of Justice.
The Harper Government has clamped down on information flows and the general tenor it has set has simultaneously fortified and calcified the historical proclivity towards information secrecy in Canada relative to other capitalist democracies. Without a full-commitment to open societies and open sources and open networks, none of these elements can flourish on their own. It is a thought worth bearing in mind, I think.