Last week in the run-up to the G8 leaders meeting in France, French President Nicolas Sarkozy convened a conference among prominent media and Internet types. The goal: how to ‘civilize’ the Internet.
As Sarkozy said,
The internet is the new frontier, a territory to conquer. But it cannot be a Wild West. It cannot be a lawless place, where people are allowed to pillage artistic works with no limits.
And you know what, he’s right. The Internet should not be a lawless frontier disconnected from the real world, and it is not. It is already deeply shaped by the same legal, political, economic and social forces that govern our actions daily.
That said, the crux of the approach being advocated by Sarkozy, and perhaps to come out in a communique at the end of the G8 meetings, is that Internet Service Providers, search engines and others are being ‘deputized’ to act on behalf of law enforcement officials and vested interests in the entertainment and ‘copyright industries’ (see the New York Times story as well). That is, they are being turned into adjuncts of both the state and vested interests to deal with matters that are, some more than others, sordid ones indeed: child pornography, money laundering, counterfeit goods and software and, of course (and in some instances) large-scale enabling of copyright infringement.
Of course, I’m the last to stand in support of child porn, money laundering, industrial scale piracy, and so forth. However, I am opposed to the full-court press that is now coming from three directions that aim to turn ISPs and search engines from being ‘gateways’ to the Internet to ‘gatekeepers’.
First, and largely since 2008, ISPs have come under a full-court press by the Recording Industry Association of America and the International Federation of Phonographic Industries (IFPI) to adopt a notice and take-down procedure. In this situation, once notified of allegations of copyright infringements, ISPs would block Internet users access to such content and, in some cases, cut off repeat offenders. Search engines would essentially make such content disappear by turning up a blank when suspect sites were queried.
The problem with this is already well-known: the gap between what is allegedly an infringement and what the law in each country actually determines to be so is big indeed. What typically happens is that private contractors using automated ‘notice and take-down’ systems take a shotgun approach, capturing much that is on the side of right in the process.
People caught in the cross-hairs have a steep hill to climb to prove their innocence. That is wrong because it turns presumptions of innocence on their head. Here’s a link to the Electronic Frontier Foundations “Takedown Hall of Shame” to get a sense of how overly-broad notices also curtail freedom of expression.
Second, Digital Rights Management (DRM) technologies began to go out of favour in the last few years, but as they were being abandoned, after 2008 the RIAA and its international counterparts were signing new memoranda of understanding with ISPs that enrolled the latter in the effort to combat piracy. The RIAA and IFPI have also pushed hard for national laws to accomplish the same ends. In other words, the RIAA is using technology, States and Markets to accomplish its goal of clamping down on content.
Sarkozy and the French Government were early and enthusiastic endorsers of such efforts and the three strikes law in France is considered by most to be particularly draconian. The IFPI has also chalked up several wins for such measures in other countries as well, including Sweden, South Korea, Taiwan and the UK, among a few others (see pp. 25-27).
Now, however, and at least in Britain such measures are under severe challenge in the courts by way of initiatives launched by two of Britain’s biggest ISPs, BT and TalkTalk, and in the court of public opinion, where they are losing badly. Yet, just as such measures come under severe criticism and challenge in some countries, they are being expanded in others.
Cont’d on Page 2 . . . . . . . .
Shaw announced plans to implement a new regime for its Internet Access services this week. There is much in the announcement to be commended, and much still to rail against.
First, the much welcomed headline news is that Shaw’s new plans basically double the bandwidth caps for its Lite and High Speed services, while the caps for the Extreme service will be increased from a 100 GB cap to 250. The prices and the speed for each service will remain the same. Nice start!
Second, Shaw is promising much needed investment in broadband networks over the next year and a half and to convert all of its television channels to digital. As the company notes,
In making this move we will triple the capacity of our network, freeing up space for more Internet, HD and On Demand programming.
Third, the new pricing regime makes available some of the fastest and most generous high-speed Internet services in North America. It will most certainly, as Michael Geist, Peter Novak and others have noted, put pressure on the rest of the ‘big 5 ISPs’ – Bell, Rogers, Quebecor, Telus and Cogeco – to fall in line.
Shaw’s new bandwidth caps will be between two (vs Rogers) and five (Bell) times as great as those of the other dominant ISPs, as the following table illustrates.
The commitment to invest heavily in a “major upgrade of our network”, and to convert all its channels to digital, in order triple the capabilities of its networks is good news. It would seem to bring Shaw closer into line with global trends (and ahead of standards in most of the United States).
The emphasis on network upgrades dovetails with ‘hierarchy of priorities’ set by the CRTC in its Network Neutrality decision too, or as it prefers to call it, the Internet Traffic Management Practices decision. Regardless of terminology, the basic idea is that Network Investment is the preferred method to deal with any congestion that exists. Shaw’s proposal appears to be in line with that idea.
If it acts as a spur for greater investment by the other major telecom and ISP providers, all the better, but we should not hold our breath. Their feet will have to be held to the fire.
Iron Fist Replaced by the Velvet Glove?
But now for the odious bits of Shaw’s intended course of action.
First, the highest speed services with the most generous bandwidth caps, or no caps at all, are only available bundled with either of Shaw’s Legacy TV or its Personal TV model. And these services will also only become available over the next 18 months as its networks are upgraded.
The bundled, highest performance Internet offerings offer speeds of between 50 and 250 Mbps and genereous bandwidth caps of between 250 GB per month and a voluminous 1 Terrabit (TB), as well. The caps are removed altogether in some cases. This is a good thing and appears to bring Shaw’s offerings closer into line with ‘global best practices’.
But tying the highest-performance Internet service to its ‘legacy’ television services is a blatantly protectionist bid — a first line of defense for Shaw’s Global television network, massive cable and satellite distribution system, and big suite of cable and satellite television channels. Enrolling you in its Internet services enrolls you unwittingly into the Shaw Business Projection Plan for all these other services. Your tail wagging its corporate dog.
The fact that Shaw is able to leverage control over its networks to influence the channels of communication flowing through them is not surprising. It is a problem as old as Roman Roads and Venetian Canals. It is a problem of the first order, for all that, and to be resisted now as much as in the past.
In 1910, the long lost precursor to the CRTC, the Board of Railway Commissioners came to a conclusion that would be startling if it happened today. As the BRC found in the ‘double-headed telegraph news monopoly’ case, Cdn Pacific Telegraph Co. and Great North Western Telegraph Co (the latter under ownership control of Western Union) had exclusive distribution rights for Associated Press news services in Canada. Cdn Pacific Telegraph was charging its
. . . subscribers for the commodity, viz., the news, delivered at a flat rate; . . . while in the case of rivals [Western Asssociated Press] the payment . . . was for the transmission, and not the commodity. . . . [T]elegraph companies could put out of business every newsgathering agency that dared to enter the field of competition with them” (BRC, 1910, pp. 274-275).
The bundling of ‘connectivity’ and ‘content’, as Shaw does in its new plans under one corporate umbrella is one of the biggest problems with vertical integration. Always has been, always will be.
Theoretically, the CRTC can do something about this after its upcoming vertical integration hearings next month. It can be taken for granted, however, that Hell will freeze over before anyone seriously considers divestiture of Canada’s big 5 integrated telecom-media behemoths — Shaw/Global (Corus), Bell/CTV, Rogers/CityTv, Quebecor (TVA), Cogeco (Radio).
The government could set up a competitor entity, the Canadian National Broadband Co (CNBC), just like the Australians. That’s not likely to happen either, the price tag of $40 plus billion being only one among many economic and ideological deterrents.
The CRTC should give serious consideration to imposing ‘functional separation’ requirements on the big 5; it would be a good compromise. Not to hot, not too cold — the Goldilocks solution to vexed Internet policy issues.
Just to be churlish, we can also note that Shaw’s plan to convert analog tv channels to digital ones is not a bright, new idea. It is long overdue and coincides with the mandatory switch over to digital broadcasting for the rest of the broadcasting system in August 2011. Shaw’s acceptable use policies are also just as abhorent as they have always been, setting out
- restrictions on what people can and cannot do with their Internet connections.
- broad assertions of its authority to act on behalf of copyright claims a
- its right to make ‘editorial judgments’ about all kinds of content hosted on and moving through its pipes.
- and to own user created content.
Shaw has moved the ball forward and we should not only hope, but push to have at least the minimum bar it has set met by the remaining ‘big five’ ISPs in Canada that control access to roughly 95 percent of Canadian subscribers: Bell, Rogers, Quebecor, Telus and Cogeco.
The advances so far did not come from the good graces of Shaw. They came from an extraordinary confluence of pressure that has been put on Shaw and all of Canada’s ISPs with greater and greater intensity over the past four to five years.
The three most significant pressures shaping the flow of events are probably:
- Open Media and the massive public that it helped to mobilize;
- the ‘tweet’ in the night by then Industry Minister Tony Clement scolding the CRTC for its UBB decision in January of this year and the upcoming hearings to be held by the CRTC this July into the matter which have ensued partially as a result;
- and crucially, the pressure from investment bankers, who saw mounting public anger and the threat of regulation as a potential danger to Shaw and the others’ bottom line and their ability to raise capital.
Ultimately, while we should appreciate what Shaw’s announcement has put on the table, this should not divert our attention from the fact that much remains. Nor should it give Shaw a free pass when it comes to the CRTC’s upcoming hearings on vertical integration.
A new, independent report commissioned by the British Prime Minister has just come out. It’s observations are astute and damning: mostly with respect to the claims used to rush the Digital Economy Act of last year into law after only 2 hours of Parliamentary debate and for the exceedingly poor quality of the evidence upon which that questionable law, and the debate over copyright/intellectual property generally, takes place.
The report was penned by respected journalism Professor Ian Hargreaves, Digital Opportunities: A Review of Intellectual Property and Growth, and based on a team of highly regarded scholars, including the amazingly talented story teller and legal scholar, James Boyle (his 1996 Shamans, Software and Spleens is one of the most splendid books on knowledge and copyright in the ‘digital age’ that I’ve ever read). The people behind the report are impressive; the range of sources consulted even more so.
The tone is set clearly in the Foreword. On page 1, it asks whether the U.K approach to copyright and intellectual property stifles innovation? Yes, Hargreaves states without hesitating. Google, for instance, is on record stating that it couldn’t set up shop in the country
Are piracy and copyright infringement real problems. Absolutely, he states. “No one doubts that a great deal of copyright piracy is taking place” (p. 6).
However, the report tempers that with two key provisos — the equivalent of a double-knuckled blow against the central props of the ‘copyright industry’.
First, “sales and profitability levels in most creative business sectors appear to be holding up reasonably well. We conclude that many creative businesses are experiencing turbulence from digital copyright infringement, but that at the level of the whole economy, measurable impacts are not as stark as is sometimes suggested (p. 6). This is pretty much the conclusion I reached in my column for the Globe and Mail this past Tuesday.
Second, “reliable data about scale and trends is surprisingly scarce” (p. 6). Since I’ve dealt with issues surrounding the economic state of the music and other media industries in other posts, including yesterday’s column, I will focus on the ‘quality of the evidence’ issue here.
Hargreave and colleagues are crystal clear that bad evidence is central to the whole issue of copyright law and adequately determining the vitality of the copyright industries as a whole, from music, to books, television, radio and animation — the whole gamut, including patents. A few examples help to illustrate the point:
- “A detailed survey of UK and international data finds that very little of it is supported by transparent research criteria” (p. 6);
- “There is . . . next to no evidence on copyright policy (p. 17);
- “[R]eliable data is surprisingly thin on the ground” (p. 69).
- “[W]e have failed to find a single UK survey that is demonstrably statistically robust” (p. 69).
The estimated scale of music piracy in the U.K. in the many studies they reviewed ranged wildly from 13 to 65 per cent (pp. 70-72). Studies globally are much the same, although a single study by Industry Canada and another by the Government Accountability Office (2010) in the U.S. (equivalent to the Auditor General in Canada) are singled out as exceptions to this rule, i.e. they’re good and follow valid analytical methods.
Based on the extremely poor quality of the evidence, the report states, “we should be wary of expecting tougher enforcement alone to solve the problem of copyright infringement” (p. 6).
Worse, not only have lobbyists been remarkably successful at driving an agenda on the basis of poor evidence, they have made “stronger Government action against online infringement . . . their top priority” without the evidence needed to support such priorities (p. 67).
And the root of the problem? The authors hold no punches there, either. “Lobbynomics”, they call it, a set of unfortunate circumstances whereby:
“Much of the data needed to develop empirical evidence on copyright and designs is privately held. It enters the public domain chiefly in the form of “evidence” supporting the arguments of lobbyists (“lobbynomics”) rather than as independently verified research conclusions” (p. 18).
As Lord Puttnam, a leading light in the UK film industries and now MP, stated in regard to the rush job on the Digital Economy Act, “We have been subjected to an extraordinary degree of lobbying… The lobbying process . . . has done none of us very much help at all” (p. 6).
Worse, other MPs have apparently been star-struck by songstresses, celebrities and cinema stars: “there is no doubt that the persuasive powers of celebrities and important UK creative companies have distorted policy outcomes. (p. 92)
Cont’d on Page 2 . . . . . . . .
The following is my column for the Globe and Mail today, with the addition of a few links here and there. I am fully alert to the fact that this is a very, very touchy subject, not least because musicians and artists are at the centre of the debate, but have been, other than a few megastars, the least to benefit financially from either conditions in the past, or those that prevail today.
Those interested in the topic might find my previous two posts of interests in this regard: the first one looks at the ‘methods’ involved in assessing the state of the music industry. It ends with the crucial proviso that we can collect “all the evidence in the world but still be morally stupid because you’ve thrown the artists and musicians amongst us under the bus”. In other words, this is not just about fun and games, but real people trying to make a real living.
That said, however, I am skeptical of the claims typically made on behalf the ‘music industry’, and equally circumspect that the interests of musicians are interchangeable with those of ‘the suits’ in the business. For those who want to hear something similar from somebody ‘inside the biz’, and who really knows his stuff, look at Bob Lefsetz’s newsletter.
Thanks to Bob, I’m listening to two great bands right now: Fleet Foxes and Mumford & Sons. It’s all about the music, being good, nay great, at what you do, and crucially the fans, those who adore your stuff and rave about you to others.
The second of these two posts sets out the idea that the music industry was in many fundamental ways the offspring of rivalry between the telegraph giant Western Union and then snarly upstart Bell Telephone Company in the late-1870s and 1880s. If rivalry between ‘network technologies’ gave birth to the music industry in the late-19th century, I think it is unlikely that ‘network technologies’ like the Internet and P2P are going to lead to their demise in the 21st century. History, in short, may be a useful and sturdy guide for thinking through the issues now in front of us.
Now, I’ll turn to the slightly revised/extended version of my column from today.
For more than a decade, the music industry in Canada, and globally, has been cast as being in dire straits — a portent of things to come for all media in the ‘digital age’, unless copyright laws are updated soon to combat illegal downloading.
The notoriety of file-sharing networks from Napster in the late-1990s, to Pirate Bay and the meting out of stiff punishment to Limewire is legendary. New sites emerge as swiftly as old ones are prosecuted out of business, fueling perceptions that the music industry is under siege.
Many claim this will only get worse as broadband Internet becomes a taken-for-granted fixture of everyday life. Copyright legislation has been proposed three times since 2005 by Conservative and Liberal governments alike.
Last year’s effort, The Copyright Modernization Act (Bill C-32), died when the election was called. It’ll be back. The Conservative’s election manifesto said it would be.
The Canadian Recording Industry Association (CRIA), backed by the Recording Industry Association of America (RIAA) and International Federation of Phonographic Industries (IFPI), argues that legislation delayed is justice denied. While Parliament dithers, they say, musicians and the music industry are getting slaughtered.
According to the IFPI, “overall music sales fell by around 30 per cent between 2004 and 2009” worldwide. The trend in Canada appears even worse, with “recorded music sales” plunging to a third of what they were in 2004, as the following figure shows.
‘Recorded Music Industry’ Revenues in Canada, 1998 – 2010
Source: Statistics Canada; PriceWaterhouseCooper.
But stop the music. What if this image of a beleaguered music industry is badly flawed?
Cont’d on Page 2 . . . . . . . .
Not only should we be circumspect of claims that the Internet, P2P networks and rampant piracy are leading to the demise of the music industry, we must remember that the music industry itself is the child of the ‘network infrastructure’ industries going back to the late-19th century.
As I noted in my last post, the “death of the music industries” only makes sense if we focus on just the ‘recorded music sales’ segment of the business rather than the “total music industry”: 1) recorded music sales; 2) online digital music sales (Internet, ringtones, etc.); 3) concerts and 4) publishing. I have provided the details for this argument in a previous post; my column for the Globe and Mail this week (May 17) will consider the specific case of Canada.
Here I want to make a different case: namely, that claims about the impending demise of the music industry is especially strange once we consider that network technologies gave rise to the music industry to begin with. In fact, the music industry was the direct offspring of ‘network infrastructure’ competition between the Western Union Telegraph Company and the Bell Telephone Company in the U.S. and Canada in the late-1870s and 1880s.
To be sure, there is more to this than just corporate rivalry over new technologies and markets. For instance, innovations in architecture — the use of iron girders, in particular — allowed music concerts halls to be built much bigger and on smaller tracts of land in crowded metropolitan cities such as London and New York in the latter part of the 19th century. More seats in bigger halls meant economies of scale. That meant cheaper tickets and bigger audiences. The expansion of the concert side of the business was, according to the historian Gerben Bakker, a key component in the ‘industrialization of entertainment”, and these processes were replicated throughout the world.
The ‘recorded music’ side of the business was ushered into being as an unintended outcome of “network infrastructure competition” between Western Union and the Bell Telephone Company in the United States. As Richard John notes in Network Nation, as part of this competitive rivalry, Western Union and the Bell Telephone Company threw vast sums of money at the leading technological geniuses of their time – Thomas Edison, Elisha Gray, Alexander Graham Bell and Emile Berliner.
The results produced several cutting-edge innovations that shaped the communication and entertainment industries into the 20th century: (1) quadraplex technology that doubled the speed of telegraphs, (2) the telephone, and (3) the phonograph.
Thus, in addition to their key role in the development of and competition between the telegraph and telephone, all of these figures, Bell, Edison and Berliner, except Gray, also became primary early movers behind the development of the phonograph and ‘recorded music’ industries as a direct result of unintended discoveries stemming from their role in the corporate rivalry between Western Union and the Bell Telephone Company between, roughly, 1876 and 1881.
Edison set up his Speaking Phonograph Company in 1877. Bell and the Bell Telephone Company patented their innovations for the graphophone and commercialized it through the creation of the Volta Graphaphone Co. in 1886, a company that, through mergers and acquisitions, would be transformed into Columbia Records over time.
Berlinger’s work at the Bell Telephone Company until 1883 led directly to his own patents for the gramaphone machine in 1887. He created the Gramaphone Company two years later, and set up international branches in London (the Gramaphone Company), Hanover, Germany (Deutsche Grammophon) and Montreal (Berliner Gram-o-Phone Company) over the next decade.
Not suprisingly, these three companies came to dominate the music industries that Edison, Bell, and Berliner had played such a primary role in creating. Remnants of Berliner’s Gramaphone companies are still with us today, having been progressively absorbed in one way or another into the operations of Universal, EMI and Sony over time.
In short, network infrastructure competition drove the development of the music industries.
There are several other important dimensions in these developments that need to be unpacked and discussed.
Cont’d on Page 2 . . . . . . . .
Hmmm, I’ve been beavering away on my next column for the Globe and Mail. Sheesh, it wasn’t suppose to be this way; the ideas are just supposed to flow.
But I digress. And the article is on a touchy and touchy-feely topic, music, the music business and copyright.
Everybody loves a song and deep down fashions themselves a singer of at least something. At least I do. While the love and art of music may be alive and well, maybe even flourishing, by most lights the business side of things is, well, a bit of a trainwreck.
‘Record sales’, they say, are in a death spiral. Indeed, Google the phrase “death of music industry” and you get 14,600,000 hits. Based on ‘Google Hits’, the “death of music industry” mantra is about one third as popular as Lady Gaga, who clocked in today with 42,700,000 ‘Google Hits’ (GH, here on out).
Some of the big 4 major labels — Warner, EMI, Universal and Sony — have roots going back to the very early days of the 20th century, and to the mid-19th if we count bible publisher-come-music and media conglomerate Bertelsmann. Today they appear to be tearing themselves to pieces.
Bertelsmann ditched its half stake in Sony BMG in 2008, but kept its ‘music publishing rights’ line (a point whose significance will become apparent below). EMI is locked in a nasty turf war between scrubby private equity firm Terra Firma Capital (it appears it is anything but ‘firm soil’) and one of the planet’s big four bankers, the Citigroup (see here).
Music and money seems to be a constant theme here. Citigroup has also put the venerable Warner Music up for auction, after its former parent company, Time Warner, cast off the company in 2005. Universal remains part of Vivendi, the French industrial-media conglomerate that has its own fair share of trouble in many quarters (i.e. a lot of fraud convictions), if not so evidently in the music business.
Big global concert and merchandising promoters like Live Nation and AEG are having their own share of woes as well, it would seem. The concert and live entertainment/merchandising side of the industry has gone boffo, but the two biggest players have blown up their balance sheets through a wave of consolidation. If anyone ever wants to see what happens when the money guys and marketers get a full grip on culture, or music, than have a good luck at the last half dozen Annual Reports from Live Nation, for example. It’s a disaster.
Even Google seems unable to find a steady place amongst the turbulent waters that constitute the music industry.
All of which is to say that the evidence seems overwhelming that the music industry is in crisis. Umm, I’m not so sure, but I’ll leave the particulars to that for early next week in my Globe column.
Here, I want to focus on two other things that I think are helpful.
Cont’d on Page 2 . . . . . . . .
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.