Down the Rabbit Hole at the CRTC: Regulator and Big 4 Make Molehill Out of Mountain on Telecom-Media-Internet Concentration Issues
As per my usual practice, this post is a slightly altered version of my column in the Globe and Mail today. It is a a wee bit longer and, as is my standard practice, comes more fully-equipped with citations and sources that you can turn to to follow up on, assess my take on things, and so forth.
In the first of two column’s last week I offered evidence and argument as to why the CRTC’s current vertical integration hearings are not likely to deal effectively with the question of telecom-media-Internet concentration in Canada. Sitting in on three full days of hearings last week has convinced me that the prospects may be even dimmer than I thought.
If you know how to say “voluntary code”, “case-by-case dispute resolution”, “skinny basic”, and status quo, you’re in luck because that’s probably what the outcome will be. Some consumers will benefit with slimmed down and more affordable basic cable and satellite packages and there’s a fifty-fifty chance that a hands-off-Netflix approach is in store, if I am right. The pay-per Internet model and less than a handful of telecom-media-Internet behemoths, however, will be still stand astride a set of highly concentrated industries, and we will be the poorer for this.
The hearings had an Alice-in-Wonderland feel, mainly because the evidence offered by all sides was remarkably poor. Consequently, discussion meandered between speculative worries and rose-tinted visions brought to us courtesy of the great media corporations of Canada.
The CRTC’s refusal to do much original research of its own compounds this problem, and compares badly with research conducted by, for example, the FCC and Ofcom, respectively. Like the mythical beaver that castrates itself in self-defense, the CRTC seems to worry that conducting original research might bias its decisions. Strange.
All of the top brass from Bell, Shaw, Quebecor Media Inc. (QMI) and Rogers attended, sometimes with as many as ten to a delegation. With few exceptions (see below), the Big Four stood as one against almost everyone else, but nonetheless they seem to have set the parameters of discussion around less than a handful of touchstone themes:
- That we should rely on market forces to the maximum extent possible.
- Canadian markets are competitive, small by global standards and need big media companies to compete.
- problems that do arise should be settled one by one after they occur rather than establishing clear regulatory rules before hand.
- concerns about the anti-competitive potential of vertical integration are mostly speculative rather than real.
Rogers allowed a crack of light to peak through when it broke ranks with Bell, QMI and Shaw to table a “code of conduct” that would require vertically-integrated media firms to sell programming rights to traditional broadcasters, such as the five CityTV stations that it owns. While the others tried to belittle or ignore Rogers’ stand on this point, the CRTC seemed to like the voluntary code of conduct idea very much. I suspect we’ll have some version of it.
Otherwise, Rogers, Bell, Shaw and QMI united behind the view that smaller rivals should not be entitled to a regulated guarantee of fair and reasonable access to their networks or the content rights associated with TSN, Rogers SportsNet, the History Channel or any of the other 100-plus television channels they own between them.
QMI’s CEO and majority owner, Pierre Karl Péladeau, scoffed at the idea that exclusive content agreements were a problem. Bell’s chief regulatory front man, Mirko Bibic called the idea that audiences should be able to access content on any device from any provider, anytime, “preposterous”.
Brad Shaw, the CEO and part of the family that controls Shaw Media, bristled when I intervened in a journalistic softball scrum to ask him to respond to the possibility that concerns with vertical integration and media concentration are not based on speculation and fear mongering but current evidence and recurring historical patterns. After shrinking back into my shoes, he returned to typical patter about how vital it is for Shaw to be “consumer centric”.
Over the course of the three days, Netflix was set up as a formidable threat to the Canadian broadcasting system. This may be a shock to some, but I got the sense that the CRTC is not all that eager to assume this role, despite enormous pressure from Bell, Shaw, QMI and (less so) Rogers, the Over-the-Top Working Group, media unions, arts and culture groups, the Senate Committee on Canadian Heritage as well as a pending Supreme Court case.
When I spoke with Michael Hennessy, Telus’s Senior Vice-President, Regulatory and Government Affairs, he came across as a thoughtful man and seemed to better understand the idea that just because a company owns the medium does mean that it should control the messages flowing through them. Telus’ primary focus is on connectivity, he told me, not content.
Telus’ periodic work with Google, amongst other things has taught the company, he also said, that it is better to grant as much access to outside content sources as possible and push control out to the edges of the network and into the hands of Internet users. One doesn’t have to be a dyed-in-the-wool Telus fan to accept everything that he claimed, but in my view Telus is on the side of angels on this question – even if this has not always been the case.
Telus’ launch of IPTV services over the past few years has been a success by Canadian standards, but obtaining content rights for its IPTV and mobile video services has been a real obstacle, with Bell standing out in this respect since its acquisition of CTV earlier this year. According to a recent OECD study, Canada ranks 19th out of 27 in terms of the percentage of subscribers to IPTV, while rates in Sweden, Belgium and France are four- to ten-times higher (p. 223). One wonders if this low ranking is related to the problems just described and regulatory rules not up to the task of curbing market power across a number of telecom, media and Internet industries?
Commercial broadcasters have been slow to develop online video services, doing so only around the end of 2007, early 2008. It was the CBC, instead, that blazed the way, only to find one of its early attempts to use BitTorrent to distribute an episode of Canada’s Next Great Prime Minister thwarted by Bell’s ‘network throttling’ practices. The big four have accelerated their efforts in the past year, mainly as Bell, Shaw, Rogers, and QMI import the “tv everywhere” from the US so that existing subscribers can access the companies’ own content anywhere, anytime.
Reflecting the fact that commercial broadcasters have been slow on the uptake, Konrad von Finckenstein asked Péladeau why QMI hadn’t launched an online video downloading service to compete with Netflix? The activities of the “state broadcaster” (the CBC), he responded, excessive regulation, and nervous investors were holding it back. The head of the CRTC also asked for evidence that Netflix was a threat to the television system, but was told by Péladeau that he had none.
Smaller players, in sharp contrast, piled anecdote upon anecdote to show that vertical integration is, in fact, a significant problem. Telus, MTS, SaskTel and Cogeco submitted a “joint proposal” as well that sets out a handful of principles that they want enshrined in a sturdy regulatory framework:
- Access to content by television program distributors and carriers should be on fair and reasonable terms.
- Subscribers should be able to access the content they want from the device they want anywhere, anytime.
- Block booking — tying the rights to purchase one television channel to buying several others, among other things – should not be allowed (a stance consistent with CRTC’s favourable view of “skinny basic”, i.e. a minimalist basic cable tv service).
- A tough regulatory regime is needed before-hand and not after the fact, as the big four would like.
- The regulator must assume a tough stance toward vertically-integrated telecom-media-Internet conglomerates that possess substantial market power.
Most independent broadcasters more or less agree with these ideas, with some minor tweaks. Despite their merit, however, the evidence to support these principles, was not convincingly demonstrated by anyone.
The fact that evidence was probably never going to carry the day anyway, however, struck me hard on Day Three when von Finckenstein called Telus’s proposal “over the top”. Newly-appointed Vice Chair of the CRTC, Tom Pentefountas, added to this sense when he asked Michael Hennessy if Telus’ “proposals essentially take the ‘free’ out of the ‘free market’?”
Across the aisle from me, Bibic, the regulatory pitbull from Bell who had made more than one CRTC commissioner wince and waiver during his presentation a day earlier, smiled broadly like The Cheshire Cat. Day 3, and the endgame was coming clearly into view.
Day 3 and the endgame was coming clearly into view.
Media Historians and the Importance of ‘Dead Tree Media’ (aka Newspapers): An Interview with Prof. Michael Stamm
A couple of weeks ago I was introduced by my friend and colleague at Carleton U, Chris Russill, to a fascinating media historian and really nice guy, Michael Stamm. I’ve met up with Michael on a couple of occasions in the past few weeks, including just last Sunday when he flipped the kayak I leant him while paddling on the Ottawa River.
Michael is in Ottawa to do research at the national archives for a new project that he’s working on. I thought this would be a good place to talk about his work and contrived a situation to do just that. I’m going to try and do this more often as I bump into people with interesting things to say that broadly fit with what this blog is up to. So, here goes.
Michael’s an assistant professor at Michigan State University and earlier this year his new book, Sound Business: Newspaper, Radio, and the Politics of New Media, was published. I haven’t read it yet, but I’ve taken a peak and it is on the top of my list.
From what I’ve glimpsed and heard so far, Michael’s book provides us with a wonderful guide to making sense of how well-established media deal with the incursions made by ‘new media’. Addressing the question of how the newspaper industry dealt with the perceived threat stemming from the rise of radio broadcasting in the 1920s, Michael crisply tells us that
“. . . newspaper publishers of all sizes turned threat into opportunity by establishing their own stations. Many, such as the Chicago Tribune‘s WGN, are still in operation. By 1940 newspapers owned 30 percent of America’s radio stations. This new type of enterprise, the multimedia corporation, troubled those who feared its power to control the flow of news and information.”
Indeed, for over ninety years newspapers have had to deal with the steady incursion of new technologies, and I might even stretch that back another sixty or so years to deal with the rise of the telegraph in the early- to mid-19th century. Historian’s prerogative.
The obvious point being that as established media industries such as the press and music, in particular, encounter an onslaught of new technologies today, so too have they done so in the past. Of course, adjustments are not easy, and some specific individuals and elements of ‘old media’ models will get slaughtered, but an expanding array of media constantly enlarges and increases the structural complexity of the overall media ecology, and eventually things seem to find a relatively stable place within the routines of our daily lives and as a set of institutional-mechanical arrangements.
I want to come back and talk more about these issues with Michael in the next few weeks while he is still in Ottawa. For today, however, I want to ask Michael about his current research and what he’s up to in the archives overlooking the Ottawa River just down the street from where I live and the Parliament Buildings.
So, Michael, welcome and thanks a bunch for joining us. Can you tell us a bit more about your current research project, and some of the nitty gritty details about, well, how you arrived at this project, what you’re finding, and lets call it your ‘archival discovery of the week’?
Thanks very much, Dwayne. I really appreciate the opportunity to share the results of some of this research. Despite the great view over the Ottawa River and the wonderful opening hours at the Archives (8AM to 11PM weekdays and 10AM to 6PM on weekends, unheard of in the U.S.), daily archival work can seem like a grind after a few weeks. This is a nice break.
Broadly speaking, my research is on the political economy of news and journalism, and this new project is an extension of some of the themes and subjects that I covered in Sound Business. As I researched and wrote about newspapers’ involvement in the development of American broadcasting, what came to impress me was how they remained vibrant and even expanded in the years after radio broadcasting began in the 1920s, all the while some futurists were predicting the “death of the newspaper.”
In the book, I called this the “persistence of print,” and as I finished that project I wanted to find a way to look at the longer-term history of the newspaper as a paper product. How and why has form of delivering the news persisted for this long?
With this issue of paper in mind, I began to see scattered references to “Canadian newsprint suppliers” in the archives I was working with, particularly those of the Chicago Tribune. As I followed this trail further over the last eighteen months, I was struck by how the need for Canadian newsprint was one of the central problems of the American news business in the twentieth century. Historians have almost entirely ignored this.
I began searching for archival materials on the subject, and I discovered that the records of the Quebec and Ontario Paper Company, the Chicago Tribune’s Canadian newsprint subsidiary, were just about ready to be opened to researchers and the public. With support of a Canadian Embassy Research Grant, I’m spending two months working with this collection this summer.
The material has been great, and what I’m ultimately trying to do with it is to combine two arcs of twentieth century history through a case study of the Chicago Tribune: the development of the American mass-circulation newspaper and the evolution of the trade relationship between the United States and Canada.
The basic facts of the matter, as I now understand them: though we often think of the newspaper as a significant source of public information (which it is), there is something less well understood about the printed newspaper, and that it is also a mass-produced consumer good with a shelf life shorter than that of milk and eggs.
Starting in the middle of the nineteenth century, publishers applied the technology of the industrial revolution to the production of newspapers by employing new methods of papermaking and printing, in the process dramatically increasing the number of papers they could produce on a daily basis and greatly expanding the size of the audience they reached with their publications. In the early twentieth century, some metropolitan dailies had circulations as high as a million. To make these newspapers required both a printing plant organized as a factory and a large amount of newsprint.
In contemporary discourse, many derisively refer to newspapers as “dead tree media.” The main animating idea seems to be highlight the perceived differences between a stodgy “old media” and a seemingly vibrant and participatory Internet, but I think it is important to call attention to the fact that newspapers are quite literally the physical products of felled trees. Because of this incessant need for large supplies of newsprint, newspapers came to have a significant effect not only on society and politics but also on the environment and on North American trade.
For various reasons, spruce proved to be an ideal wood for making newsprint, and the location of dense forests along and north of the American-Canadian border, particularly near navigable waterways on the Great Lakes, made the tree even more attractive to American publishers. This need for spruce-based paper increasingly drew publishers into arrangements with Canadian paper mills and made publishers seek raw materials for their products from outside the United States.
As American and Canadian policymakers struggled with trade reciprocity debates in the early twentieth century, America newspaper publishers lobbied aggressively in favor of free trade in order to get cheaper newsprint. Though negotiations on full reciprocity failed in 1911, the American passage of the Underwood Tariff in 1913 made newsprint from Canada a duty-free item.
This new trade status was fortuitous for the Chicago Tribune’s Robert McCormick, who took over as the paper’s publisher in 1911. McCormick’s family had owned the paper since 1855 and, foreseeing a growing city, McCormick also saw tremendous growth potential for the paper.
When he took over the Tribune, one of the first things McCormick realized he needed to do if he wanted to expand his business was to find a source for cheap and plentiful newsprint, as this was among his most significant and costly inputs. Immediately after newsprint was made duty free, McCormick built one of the most technologically advanced mills in the world on the Welland Canal at Thorold, Ontario.
He then began scouting timberlands on Quebec’s North Shore, where some of the richest pulpwood forests in North America were located. McCormick soon had concessions from the provincial government to log a piece of forest almost the size of the state of Connecticut.
Instead of simply taking the trees from Quebec to his Thorold mill, McCormick decided to build another new mill on the remote site. In doing this, McCormick was driven not only by business strategy but also by an ambition to act as urban planner, and in 1936 his company began building the city of Baie Comeau.
Drawing upon his experience as president of the Chicago Sanitary District, where he had supervised the installation of public sewer and electrical systems, and upon the lessons of Pullman, the revolutionary but ultimately unsuccessful company town built by railroad magnate George Pullman in the 1880s just south of Chicago, Robert McCormick directed the construction of both a cutting edge newsprint production facility and a model company town.
Construction of the mill and town began in the winter of 1936-37, and the mill formally opened on June 11, 1938.
Cont’d on Page 2 . . . . . . . .
Bell was slammed with the highest fine possible today for ripping people off for bundled telecom-media-internet, $10 million. The Competition Bureau meted out the stiffest punishment it has and arrived at a settlement out of court that will also see Bell pay the $100k costs the bureau sunk into the investigation.
Here’s what the Competition Bureau’s press release had to say:
The Bureau determined that, since December 2007, Bell has charged higher prices than advertised for many of its services, including home phone, Internet, satellite TV and wireless. The advertised prices were not in fact available, as additional mandatory fees . . . were hidden from consumers in fine-print disclaimers.
Astounding. Incredible. WTF?
I just heard Melanie Aitken, the Director of the Competition Bureau, talking on the CBC. She’s nobody’s fool, and we could only wish her tools were stronger and that instead of just looking at pricing and advertising, as important as they are, the Bureau could delve deeper into the very structure of the telecom-media-Internet industries of which Bell and its deceptive practices are a part.
That Bell is not exceptional in this regard is illuminated a bit further when we recall that it was less than a year ago that Rogers was also slammed by the Competition Bureau. In that case, Rogers was using the false advertising claim that its new, down market wireless phone service offered “fewer dropped calls than new wireless carriers”, an obvious — but completely false — attempt to cast aspersions on the first new competitors to enter the highly concentrated Canadian wireless market in years. So, chalk one up for consumers and competitors courtesy of the Competition Bureau.
All of this is, as I said, all to the good. It could, however, be even better when it comes to integrated telecom-media-Internet industries in four ways.
First, and again as I just said above, it needs to look closely at the structure of these industries (see here for related post and evidence).
Second, it needs to effectively deal with the fact that these industries are highly concentrated by the conventional standards of Concentration Ratios (T1, 2, 3 and 4 players control X% of market) and the Herfindahl-Hirschmann Index (HHI) (Market share of each player squared and summed). The trends in Canada are also high by global standards – at least twice as high as in the U.S.
For those who like to watch how sausage is made, you can see some of the data backing up these claims in my presentation on the state of telecom-media-Internet concentration in Canada as part of my work with the International Media Concentration Project out of Columbia University. I am in the process of finishing the data collection for 2010 and will update soon.
The levels of concentration are not getting worse; nor are they getting any better. They’ve stayed pretty steady for most of the last decade at a high level.
Third, we need learn how to talk about communication, media and values. The fact that media concentration levels have stayed steady, even if at a high level, might be good enough for some people, but I don’t think it is. Why? Because it does not serve to maximize the diversity of voices available and the range of free and creative expression to as many people as possible.
Taking high levels of concentration as a given adopts the technocratic standards of the bureaucrat, like the CRTC which states that its goal is to promote “as much diversity as is practicable“. The last term is entirely procedural, rather than normative. Compare ‘as much diversity as practicable’ with the standard I introduced above regarding the need to strive fro the maximum range of voices and freedom of expression possible.
The CRTC eschews Facts because it refuses to do much of its own original research. It’s feelings about norms and values are even more suspect. Indeed, even the old sign hanging over it’s front door, at least it’s web page, “regulation in the public interest” disappeared from all public documents sometime in late 2009. The regulator, in sum, has intentionally fenestrated itself in terms of both Facts and Norms, suggesting that not only is it poorly equipped but not all that interested in doing the job at hand.
Conservatives like to desparage this kind of talk as “aspirational language”, or words that convey some sense of how things might be or what’s worth striving form. Liberal fantasies, they smirk.
Umm, I think we should talk about what we want. That, in some ways, is what democracy is all about, organizing, talking, and translating into action some notion of what we want, not in all domains, but in those that constitute the ‘networked digital agora’, yep, we wanna talk.
Until we learn how to talk about and reconcile both the Facts on the ground with the ‘Norms’ conveyed through the language we use, as one of my fav social theorists/philosphers, Jurgen Habermas (and after The Structural Transformation of the Public Sphere, for you insiders) might put it, we will be forever unable to properly deal with the questions before us.
But back to the more immediate question at hand, and my fourth suggestion in terms of dealing with problems that, if not endemic, certainly seem to crop up with regularity in Canada’s telecom-media-Internet industries.
Bell got caught screwing people over and that’s a great deal. Slimy behaviour, however, can occur equally in markets that are topsy turvy with ruinous competition or heavily concentrated. In the case at hand, I’d say we have slimy behaviour by Bell and Rogers for two years running in highly concentrated markets. We need to think about that fact with eyes wide open, then decide what we wanna do about it.
And to this end, I would say that the Competition Bureau and CRTC should, after the latter in particular radically rethinks its raison d etre and way of doing things, work together on studying telecom-media-Internet markets in Canada and pick a course of action. The ‘maximum reliance on market forces’ mantra foisted upon the CRTC by Cabinet Directive from the Conservative Government in 2006 has gotta go.
Things cannot proceed on the terms now taken for granted but at the very least must take as a minimal model the congenial hand-in-hand approach taken by the Dept. of Justice and the FCC in the US in the recent approval of cable giant Comcast’s take-over of NBC-Universal. Some, indeed many, still refuse to accept this as a good deal, including FCC Commissioner Michael Copps, who wrote a scathing rebuke of the approval.
By Canadian standards, however, the Comcast NBC-Universal decision, truly is a ‘beacon of hope’ compared to the standards that we have now. To see the Competition Bureau and CRTC walk hand-in-hand with a real sense of the ‘facts’ on the ground and the values of the most open and democratic communication and media system possible clearly in sight would be a really decent place to start.
At the peak of their notariety, the self-styled hactivist group, Lulzsec, declared today that it was winding down its efforts.
The group of largely unknown maruaders had defaced, defiled and otherwise disabled websites and ‘network operations’ of a number of high profile targets: Sony Pictures Entertainment, Disney, EMI, the U.S. Congress, US Navy, the CIA’s public website and other targets in the defense industries such as Lockheed Martin.
It is this ensemble of state-media and entertainment companies-telecoms-military firms that the theorist James DerDerian calls the Military-Information-Media Entertainment, or MIME complex. These are the entities that LulzSec has had in their targets, unhappy with journalistic coverage of Julian Assange and Wikileaks, outraged that people can’t remix big media content at will, and convinced that murky links across the MIME complex undermine open flows of information.
I can’t claim to know a ton about this MIME stuff, but regularly read those who do. The Open Network Initiative at UT led up by Ron Diebert in cooperation with others at SecDev in Ottawa. James DeDerian, as I said, is also very good.
The basic point that they make is that it is is useful to pay attention to the intersection of networked media technologies, entertainment and security. That’s exactly what LulzSec has accomplished; forced us to pay attention to these things, if nothing else.
Their logo is way cool — a Digital Robber Baron who looks suspiciously like his rapacious 19th century counterparts such as the reviled Jay Gould.
LulzSec’s Manifesto declaring the end of their activities is a combination of Karl Marx retuned for the digital age and “Jack Ass”. Here’s what they had to say:
For the past 50 days we’ve been disrupting and exposing corporations, governments, often the general population itself, and quite possibly everything in between, just because we could. All to selflessly entertain others – vanity, fame, recognition, all of these things are shadowed by our desire for that which we all love. The raw, uninterrupted, chaotic thrill of entertainment and anarchy. It’s what we all crave, even the seemingly lifeless politicians and emotionless, middle-aged self-titled failures. You are not failures. You have not blown away. You can get what you want and you are worth having it, believe in yourself.
While we are responsible for everything that The Lulz Boat is, we are not tied to this identity permanently. Behind this jolly visage of rainbows and top hats, we are people. People with a preference for music, a preference for food; we have varying taste in clothes and television, we are just like you. Even Hitler and Osama Bin Laden had these unique variations and style, and isn’t that interesting to know? The mediocre painter turned supervillain liked cats more than we did.
Again, behind the mask, behind the insanity and mayhem, we truly believe in the AntiSec movement. We believe in it so strongly that we brought it back, much to the dismay of those looking for more anarchic lulz. We hope, wish, even beg, that the movement manifests itself into a revolution that can continue on without us. The support we’ve gathered for it in such a short space of time is truly overwhelming, and not to mention humbling. Please don’t stop. Together, united, we can stomp down our common oppressors and imbue ourselves with the power and freedom we deserve.
So with those last thoughts, it’s time to say bon voyage. Our planned 50 day cruise has expired, and we must now sail into the distance, leaving behind – we hope – inspiration, fear, denial, happiness, approval, disapproval, mockery, embarrassment, thoughtfulness, jealousy, hate, even love. If anything, we hope we had a microscopic impact on someone, somewhere. Anywhere.
Thank you for sailing with us. The breeze is fresh and the sun is setting, so now we head for the horizon.
Let it flow…
Lulz Security – our crew of six wishes you a happy 2011, and a shout-out to all of our battlefleet members and supporters across the globe.
So, is this what a call to the ‘coders of the world to unite looks like’? Is it Karl Marx’s new cybertariate rising up to throw of the shackles of digitization and the incessant ‘tribal drumbeat’ of an always connected, always on people? A world in which the amount of necessary labour time becomes longer and longer and the walls separating ‘work’ from ‘play’ and ‘eros’ (Marcuse) are completely intertwined. Is this why high flying people send pics of their penises to people they don’t even know, compounding their own stupidity by ‘broadcasting’ their message to all rather than sending it just to one?
Servers have been taken down over the last several days by law enforcement in not just the US but in many places and a 19yr old Brit arrested. LulszSec’s manifesto suggests that (1) the ‘network’ is in place to continue the operations and (2) the operations are just because the examples of complicity involving the MIME the come at the expense of civil liberties, democracies and open media and entertainment continue to pile up.
This past week, Comcast, ATT and Verizon have come closer to taking of using control over their networks to help the media and entertainment industries preserve their own ‘business models’. The National Security Agency works hand-in-glove with Google, Apple, Microsoft, Nokia, etc. to protect Lockheed Martin and other ‘critically important Defense Infrastructure’ companies.
As long as the MIME continues to pose severe threats to open information flows, civil rights and democracy, groups like LulzSec will step into the breach. And whether we love or loathe them, they will raise our attention and draw it to some fundamental points.
A new report by the CD Howe Institute came out today. It’s not big, just 3 pages and seemingly informed by a bunch of guys sitting around a table at the Howe’s ‘inaugural meeting’ last week (June 17).
It is brash, and some might dress it up as bold: drop all limits on ownership of telecoms and media industries in Canada, it says. Full stop.
No phase out. No ‘newcomer advantages’, full stop again. No attempt to separate the ‘medium’ (wires, spectrum, sewer access) and the message (broadcasting, integrated suite of ‘content’ from mags to blogs) from one another. A digital free for all, you might say.
Perhaps the gentlemen, and they were with the exception of only a single woman, thought this might be a good idea while they sat around and chatted last Friday afternoon. Apparently, there were not so many women ‘law & economics’ types available to join them, given that all but out of the 16 places apparently went to the guys and boys from Bell (see below). I guess ‘law and economics’ types like Sheridan Scott, a hard liner in these matters, and Monica Auer, who generally takes the opposite tack by speaking eloquently and passionately on the telecom and media workers’ behalf, weren’t available, or any of the other smart dames roaming these circles as I saw, in the minority, at the CRTC’s hearings this week.
I looked at the composition of ‘the deciders’ not just because their gender was so obviously skewed, but because I recognized the names of most of the guys. One in particular leapt out, Jeffrey Church, a University of Calgary economics professor. By all accounts, he’s an excellent teacher. Professor Church caught my eye because, in addition to advising the ‘big 3Ps’ in Canada as I’ll call them — Petroleum, Alberta Beef Producers, Pharma — Professor Church just wrote an economic analysis for Bell as part of the very, very important vertically-integrated telecom-media-Internet hearings now being held by the CRTC.
According to Church in his voluminous 93 page submission on Bell’s behalf, vertical integration is good for consumers and for Canada (p.5). I disagree, strongly, for reasons set out regularly in this blog (e.g. here) and my column for the Globe and Mail on Monday.
It’s not just Church that is so closely tied to Bell, but also Marcel Boyer, Bell Canada Professor Emeritus of Industrial Economics, Université de Montréal, as the CD Howe report indicates on the back of this slim 3 page ‘report’. 2 out of 16 does not a majority make, obviously, but their presence does stand out.
The rest of the lot in this ‘law and economics’ crowd does not seem very adventuresome, either. I know one professor occupying a BCE endowed chair that won’t be called upon, Professor Robert E. Babe at the University of Western Ontario, for he has traced the propensity of telecoms historically to go from limited competition to ‘total consolidation’ on a regular basis. Let us say that the fact that Howe ‘report’ has zero to say about such notions is not all that surprising.
The 3 page ‘report’ is candid that dropping the foreign ownership limits on everything — telecom, media, internet — will not increase the number of competitors in the market. As it states, “given the small size of the Canadian market, the consensus view saw no major change in the number of national competitors”.
Translation, the big three companies in wireless telecoms — Bell, Rogers, Telus — for instance will still account for about 94% of the market (according to CWTA 2010), but they might be owned by yet a larger foreign based telco (Vertizon, the ‘new’ AT&T, Deutsche Telekom, etc.) or may private equity funds. Me, I have doubts many foreign investors — telcos, priv equity funds, banks — will even come if permitted to do so (or if we want ’em to on such ‘carte blanche’ terms). I’m not alone on this, and hardly radical, given that even the World Bank states that the keys to effective foreign ownership is a ‘strong state’ able to regulate and competition.
Instead, the Council of 15 wise men and 1 smart woman says, drawing on newfangled theory about ‘competitive innovation’ drawn from the right-wing side of Schumpeterian ‘innovation economics’, that “the gains from liberalization would likely result . . . from better performance by telecommunications market participants”. Umm, I hope so, especially because its this same crowd breying for the withdrawal of any meaningful conception of regulation or state intervention. The CRTC’s horizons have been blinkered and public ventures like CANARIE have had their wings clipped. How foreign capital will ‘improve’ performance standards in Canada is not clear to me/self-evident.
The report advocates this ‘regulatory shock and awe’ to be developed in one swell swoop, with no distinctions kept between telecoms and broadcasting, between networks and content, between incumbents and newcomers. The telecom-media-Internet sectors are now so entangled on account of digitization and how people use media that they must be treated together as a whole. Partial agreement there about treating things ‘holistically’.
More targetted measures are suggested as alternative to foreign ownership for whatever “cultural policies” might be left over. Some of these ‘targetted measures’ I believe in — securing financing for content production, shelf space, strong CBC — and they have been promoted by at least two of the same writers involved in today’s 3 page missive (e.g. see Hunter and Iacobucci, with a third author Michael J. Trebilcock).
There are several problems with this “report”, however, that make it’s contribution to public discussion dubious, despite the fact that it will gain much attention.
1. Three pages is not a report and should not be pitched as one.
2. The Council of the Wise is skewed along lines suggested above, ie. by Bell and by Gender. Bell has always had a visible hand in the telecom, broadcasting and media industries, indeed, since it began broadcasting speeches, songs and sermons in the 1880s and took-over the Chairmanship of the 1905 Mulock Commission which had originally been convened to look into the underdevelopment of the telephone system in Canada in the early days of the 20th century.
So, that Bell continues to be front and centre 100 years later, at the dawn of the 21st century, is both a marker of continuity and somewhat unsurprising, but equally suspect/problematic in each of these occasions. The presence of Bell’s hired gun (Church), a Bell sponsored ‘academic chair’ (emeritus, Boyer), and BCE CEO George Cope’s speech at the C.D. Howe two months ago all so bunched up in time and common stance has a whiff of something not quite right about it.
3. While I don’t actually have many problems with increasing competition and dissolving lines between the medium and the message, or the network infrastructure and content, we also need to be upfront about the fact that the former (media infrastructure) are generally scarce and the latter (messages) abundant. In today’s OECD Communication Outlook 2011, it is clear that, generally speaking, the top 2 ‘netcos’ in each of the OECD countries account for between two-thirds and three quarters of fixed and mobile telecom network markets in each of the OECD countries (pp. 56-59). This means:
- that Netcos generally should be regulated for market power, ‘messagcos’ generally not.
- ties between Netcos and Messagcos are congenitally fraught with problems and propensity for anti-competitive behaviour.
- Free speech standards and the values of a ‘networked free press‘ are also at play (and here). As the United Nation’s Human Rights Council recently stated, those standards apply to the Internet and people should have, as Article 19 of the Universal Declaration of the Rights stated before it in 1948, the freedom to receive and impart any information, through any media regardless of frontiers. At the CRTC Hearings on vertical integration the other day, Bell’s Mirko Bibic and Shaw’s brass called the idea that people should have access to any content on any device “preposterous”. The C.D. Howe ‘report’ is oblivious to these considerations.
4. The C.D. Howe report misses reality and the ‘big picture’. Perhaps this is because there is not a whiff of heterodox thinking among the ‘law & economics’ experts who wrote it. Not one ‘ecclectic’ economists, not one wild eyed, crazy lawyer, not a communication and media scholars or a historian in sight.
This is too bad because as long as it continues to be the case, people will continue to talk past one another. And it also means that ‘reports’ like this one, and the policies and approaches that actually do follow close in tow in the ‘real world’, will lack legitimacy.
5. Without being able to expand their horizon, the authors of the C.D. Howe ‘report’ blithely countenance “North American integration”. Economically, as I said above, I don’t have a particular problem with that, although I doubt that things will pan out as they expect, and even that what the Howe folks do expect ain’t much (“better performance” from same number of players).
Politically and culturally, however, there is a problem, not with Cancon and ‘traditionalist/romanticist’ conceptions of culture, but ‘network culture’. Netcos and search engines are now closely allied with state security, military strategy and defense contractors. It’s probably best to keep some clear blue water between these domains. The authors give no hint that they have even thought of this.
Netcos, ISPs, search engines, etc. are also constantly being badgered by lobbyists as well as politicians in Canada and the U.S. to play a greater role on behalf of media and entertainment industries (for most recent and strong opposition to this from within just the mainstream’, see here). The approaches have differed, with the last government in Canada wisely turning down lobbyists push to have ISPs play the role of ‘copyright cop’, disconnecting people who repeatedly are identified as ‘copyright bandits’.
The International Federation of Phonographic Industries (IFPI) launched it’s efforts to lean hard on ISPs and search engines, and less on Digital Rights Management (DRM), in 2008. It has been picking off ‘wins’ for this agenda around the world, but not so much yet in Canada.
Yesterday, CNet journalist Greg Sandoval reported that AT&T, Comcast, and Verizon “are closer than ever to striking a deal with media and entertainment companies that would call for them to establish new and tougher punishments for customers who refuse to stop using their networks to pirate films, music and other intellectual property”. That turn-of-heart, in turn, he reports, was eased by coaxing from the Obama Administration and the National Cable TV Association.
The pressure is already strong in Canada, but so far government and regulators have refused to make ISPs the deputies of the media and entertainment industries or to regulate the Internet as a broadcast distribution medium. On law and order, however, the push is for a stronger state and more compliant Netcos and Searchcos.
While there’s lots of dots to connect between all of these latter points, the key idea is that integration at the network and market levels is going to increase pressure to harmonize tougher matters that impinge greatly on network media, and thus network culture. That the blokes and one women from C.D. Howe have nary a word about this and don’t dare let the phrases ‘network neutrality’ and ‘open media’ cross their lips is a problem of the first order because those concerns, as sure as night follows day, are at the heart of the emergent network media culture. How can foreign ownership be reconciled with these concerns should be the question, rather than if it if good or bad altogether.
In sum, until we can start speaking one another’s language and stop passing off economic and policy platitudes backed by those with big stakes in the game, the nominal ideas presented in this “report” should be shelved and other big questions — vertical integration, for example — put on hold.
Ultimately, Pork, Petroleum and Pharma are not the same as telecoms and media. We need some new thinking for ‘new media’.
Until we recognize this, we’re not going to get very far, at least in a a way that takes into account the full range of issues at hand, rather than the economists narrow measuring rod of value.
As I normally do, this post largely replicates my column for the Globe & Mail today with the addition of a few more links so that you can follow up on things that I refer to. I was at the opening of the hearings today and plan to be there a few more times this week and next. I’ll have more to report in a few days.
Altogether, seventy-eight different parties filed interventions with the CRTC. There are 50 scheduled to give presentations over the next two weeks. You can find all of the links to the briefs and studies filed with the CRTC by the companies and other intervenors here.
The CRTC’s hearings on vertical integration began Monday. For the next two weeks this means that the four major vertically-integrated media companies in Canada – Bell, Shaw, Rogers and Quebecor – could face tough questions about whether they have the clout to dominate telecom, media and Internet services across the country and, if so, what should be done to curb that potential?
The hearings were scheduled last November after the CRTC approved cable giant Shaw’s $2 billion take-over of bankrupt Canwest Media’s television assets (27 television stations, the Global network, 30 specialty cable and satellite channels). It was given added impetus after Bell’s $3.2 billion deal to acquire CTV and the A-channels was given the green light in March.
There is every reason to be skeptical about these hearings given that they are a classic case of “bolting the barn door after the horse has already left the stable”. It is also CRTC approvals all down the line that have allowed integrated media conglomerates to become the norm to begin with.
In the U.S., media conglomerates have become the exception (Comcast/NBC-Universal) after the disastrous AOL Time Warner merger, the collapse of the ‘old’ AT&T, break-up of Viacom-CBC, and so on. Indeed, vertical integration is in retreat in almost every other developed capitalist democracy.
We should also remember that Bell attempted – and failed— to extend its reach from the medium to the message from 2000 to 2006 by taking-over CTV, CHUM, and the Globe & Mail. The fate of Canwest was worse. Yet, we seem to be stuck in a time warp, with CEOs, Cabinet Ministers and the CRTC singing in unison that media conglomerates are all the rage, for much the same reason that they did back in the 1990s.
Be that as it may, Bell, Shaw, Rogers and Quebecor Media Inc. (QMI) do exemplify the trend in Canada. They are the ‘big four’ and the hearings are all about them. They stand at the apex of a set of telecom, media and Internet markets that have grown greatly from $42 billion in revenue in 1998 to $73 billion today (in constant 2010$).
The real issues, however, are not about the sheer size of the ‘big four’, but their market power. Between them, Bell, Shaw, Rogers and QMI control:
- 86 percent of cable and satellite distribution
- 70 percent of wireless revenues
- 63 percent of the wired telephone market
- 54 percent of Internet Service Provider revenues
- 42 percent of radio
- 40 percent of the television universe
- 19 percent of the newspaper and magazine markets
- 61 percent of total revenues from all of the above media sectors combined.
That, by any standard measure of concentration, constitutes a highly concentrated market.
The fact that Bell, Shaw, Rogers and Quebecor stand as gateways to so much raises concerns that they will give undue preference to their own services rather than serve as open gateways to the maximum range of entertainment, communication, knowledge and news possible. In this regard, more is a stake than anti-competitive behaviour, because the range of expression available in a society is a barometer of the quality of freedom of expression and democracy in it. None of the ‘big four’ waxes much about this, however, insisting as they do that the laws of normal economics should be the only measuring rod of value.
To be sure, the ‘big four’ are hardly the only players in town. There is also an important second tier of a dozen or so smaller players that have stuck to their knitting in just one or two media: Telus, MTS, SaskTel, Cogeco, Bragg/Eastlink, the CBC, Astral, Postmedia, Transcontinental, Power Corp, Thomson/Globe & Mail, Torstar and Brunswick News. Then there is a third tier made up of the thousands who fill in the nooks and crannies of the media universe: Wikipedia, the Mark, media workers, star journalists, opinion leaders, blogs, your best friend, personal websites and so on.
The position of all these parties turns on where they sit. To the ‘big four’, to the extent that there’s ever been a ‘golden age’ of media, the picture just presented is it. Thousands upon thousands of actors, big and small, making it nearly impossible for any single entity to exert excess influence over it all.
According to Bell’s hired-gun, University of Alberta economics professor, Jeffrey Church, “vertical integration is beneficial for consumers”. According to him and other briefs filed by the big four, consolidation is good for consumers and Canada because:
- it reflects efficiencies, spurs competitive innovation and is a global trend.
- telecom, media and Internet markets in Canada are “highly competitive”.
- our ‘small media economy’ needs a few deep-pocketed ‘national champions’ to compete globally and invest heavily in innovation at home.
- instances of harm are mostly imaginary and few and far between.
- it helps keep “consumers . . . within the regulated system” (Shaw, p. 4)
The collapse of media conglomerates elsewhere, the evidence of market power above, and the fact that Canada has the eight largest media economy in the world, after France and Italy, and just before South Korea and Spain, should raise an eyebrow or two about claims one through three. Claim four is false (see below), and the last one repugnant.
Many in the second tier and ‘nooks and crannies’ of the media also challenge these claims. Telus, for instance, argues that the harms are real, not prospective. Buying program rights, for example, from CTV, the Comedy Network, TSN and two-dozen other channels, it argues, became a whole lot harder, and more expensive, after Bell Media took them over.
Access, a cooperatively run cable-system-cum-Internet provider in Saskatchewan raises similar concerns. Those that have content, but not distribution networks – Astral, CBC, media workers – make a similar case, but point to how control over networks rather than programming rights can cause real world harm.
Periodic squabbles between Quebecor and Bell highlight much the same point, with Quebecor’s SunTV hobbled in equal measure by self-inflicted wounds and its inability to sign an acceptable ‘contract for carriage’ with Bell. Just last week, the CRTC declared that Bell’s decision to move Shaw’s ‘Cave TV’ service into the upper stratosphere of its offerings conferred an undue preference on channels Bell owned, and ordered the change to be reversed. If these pitched Goliath versus Goliath battles are regular occurrences, we can only imagine the problems that David – the little guy – is having.
While Bell, Shaw, Rogers and QMI operate their own online video services, they assert that congestion problems require them to manage traffic through usage-based billing and bandwidth caps, although such measures cripple rival online video distributors such as Netflix, Apple TV, GoogleTV, and so on. Netflix, for instance, downgrades its services relative to standards elsewhere, and bitterly complains about having to do so, all the time. Smart and savvy telecom guys like Jean-Francois Mezei and rabble-rousing groups like Open Media are convinced that such practices are a deadweight on creativity, innovation, freedom of expression and an open internet.
For the public, the practices just listed and networks that are under-developed and over-priced by global standards constitute subtle yet pervasive constraints on how we use and experience the emerging networked digital media. Stubbornly, Canadians lean against the wind and remain heavy Internet users, downloading and uploading to and from Youtube, virtuously contributing to Wikipedia, and watching porn at rates that rank at the very top by global standards.
All this, too, despite the fact that, as Shaw’s brief repeatedly states, the industry and regulators are one when it comes to the goal of keeping “consumers in the existing broadcasting system”. We can only imagine what things might be like if they strove for the maximum freedom of expression possible, rather than only “as much diversity as practicable”, as the CRTC put it in its 2008 Diversity of Voices decision.
Ultimately, the problems of fully-integrated media conglomerates are congenital, not imaginary. They run hand-in-hand with media history the world over and until we accept that, we’ll have to continue settling for scraps off the table as regulators let the ‘big four’, I mean, the market rip.
My most recent column for the online technology section of Globe &Mail came out Tuesday. It is available here.
The article builds on some recent posts that I have done considering the mounting pressures being put on Internet Service Providers to act more like gatekeepers rather than gateways to the Internet. Four such forces, I suggest, are pushing in this direction:
- a strong push from the ‘copryight’ industries, especially the music industries, to make ISPs and search engines extensions of the copyright enforcement regime. This has become especially strong since 2008, when the International Federation of Phonographic Industries (IFPI) and the Recording Industry Association of America (RIAA) turned to such measures more forcefully, while backing off somewhat from Digital Rights Management (DRM) (see page 3 of the IFPI’s Digital Music Report, 2008);
- the near universal adoption of usage based billing and bandwidth caps by Canada’s ‘big six’ ISPs — Bell, Rogers, Shaw, Quebecor, Telus and Cogeco — and now the mid-sized Atlantic region player, Bragg/Eastlink (although with some recent significant developments from Shaw).
- the fact that all of the major ISPs, except Telus, are vertically integrated and appear to be using usage based billing and bandwidth caps as a kind of ‘television business protection plan’ for their interests in the television industry.
- and finally, the focus of yesterday’s column in the Globe and Mail, the push from national security and law enforcement agencies to build in increasing monitoring and surveillance capacities into their networks, and to conduct ‘warrantless searches’ if proposed new legislation is passed.