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A Radical Broadband Internet & Cultural Policy for Canada

This post responds to last weekend’s announcement by Canadian Heritage Minister Melanie Joly of a top-to-bottom review of Canadian broadcast, arts and culture policy. It’s also informed by the CRTC’s #TalkBroadband review where it is wrestling with the vital question of whether universal, affordable basic telecoms services should be expanded to include broadband internet access and, if so, at what standards of speed, quality and affordability, and who should pay for it all?

Both events offer enormous opportunities for good things to happen, but also for much mischief, especially if those who have been lobbying the new government day and night since it arrived in office last November get their way. Indeed, Bell has lobbied various arms of the new Trudeau government thirty-two times – nearly twice a week! — between the time it took power in November and the end of March (Office of the Commissioner of Lobbying of Canada). In light of this, while careful and considered thought is essential, there is no time to waste.

In this post, I want to do three things:

  1. outline the scale of the media economy and the state of concentration and vertical integration across the telecoms, internet and media landscape in Canada – the bedrock upon which all else unfolds;
  2. discuss what regulators and policy-makers have done in response to these conditions so far and broader policy issues related to broadband internet, mobile wireless and broadcast policy; and
  3. conclude with five modest proposals, one large one and one radical suggestion about what might be done to close the gap between how things are and what we might want them to be.

A Lay of the Land: Bigger Players and A Bigger Pie

While the Canadian media economy is small by US standards, it is amongst the biggest dozen or so in the world. The telecoms, internet and media markets in Canada have nearly quadrupled in size in the past thirty years. Total revenues were $75.4 billion in 2014.

Is media ownership concentration in Canada high?

Yes, based on historical, international and conventional economic measures (see the CMCR Project’s Media and Internet Concentration in Canada, 1984-2014 report).

Is the level of vertical integration in Canada high? Yes. The top 4 Canadian vertically-integrated (VI) companies’ – Bell, Rogers, Shaw, QMI, in that order — share of all telecom, internet and media revenues is 57%.

Figure 1: The “Big 4” VI Companies’ Share of the Media Economy, 2014

Figure-3-Vertical-Integration-and-the-Network-Media-Ecology-2014

Sources: CMCR Project Media Industry Data.

This is significantly higher than the top four VI companies in the US (40%): AT&T (DirecTV), Comcast, Charter (including Time Warner & Bright House) and Cox. Figure 2 below shows the state of affairs before yesterdays amalgamation of Charter, Time Warner and Brighthouse was approved.

Figure 2

 

Screenshot 2016-04-27 02.20.18

Sources: Company Annual Reports.

Canada ranks at the very top of the list of 30 countries studied by the IMCRP in terms of vertical integration (see here and here).

The big Canadian telcos – except Telus – all own substantial television operations, sports teams and arenas, and so forth. Other than AT&T’s recent acquisition of DirecTV, most US telcos do not own their own television and film operations: Verizon, Frontier, Centurylink, T-Mobile. Besides AT&T, there are no telcos on the list of four biggest vertically-integrated companies in the US.

But what about Google, Facebook and Netflix? Their combined share of all media revenues in Canada is less than 4 percent – as of 2014 (see CMCR Project Workbook “Top 20 w telecoms” sheet).

Are Canada’s vertically-integrated media companies too big to regulate? No.

Are they being regulated effectively? Not as effectively as they might be.

Do regulators have justifiable reasons to intervene? Yes.

Concentration and vertical integration levels are high and the companies’ abuse of their market power is now a conclusion of fact, not conjecture.

Wireless markets are under-developed; prices per GB on wireless and wireline networks are high; speeds relative to comparable international peers are high for wireless, modest for wireline. Adoption is moderate for the latter, but extremely low for the former (mobile phones) (a series of international price, speed, access, adoption and subsidy comparisons can be found here)

People in Canada are voracious users of the internet and all kinds of media, and have long been so (see Cisco’s Visual Network Index Forecast, 2015-2020, for example). Still, however, they must also measure what they watch and do with these vital tools of modern life because of the high cost of a GB in Canada and the prevalence of relatively low data caps on wireless and wireline networks.

Restrictive data caps reflect the high levels of vertical integration in Canada and serve to protect the VI giant’s broadcast operations from streaming services like Netflix, etc. Just two days ago, in contrast, the FCC in the US approved the take-over of the Time Warner and Brighthouse cable companies by Charter but only on condition that it commit to not using data caps for the next seven years. This was done specifically to remove an barriers to the further development of over-the-top video services like Netflix, Amazon Prime, and unbundled services from CBS, Viacom, HBO, the NLB, and so on (see here, here and the WSJ).

In Canada, the CRTC gave provisional blessing to data caps back in 2009. However, they have gone from being used sparingly to manage internet congestion to become a steady and lucrative new stream of revenue for Bell, Rogers, Telus and Videotron ever since (Shaw advertises data caps but does not apply them). Canadians loathe data caps and the expensive “overage charges” they entail. Data caps send a dumb message as well: that somehow we are using “too much internet”.

While Shaw distinguished itself on this point when appearing before the CRTC on Tuesday, it has been discouraging to listen to Bell, Telus, MTS, SaskTel, Bragg and the small indy telcos talk about the need to scrimp on how much internet people use and the speeds that should be available. Their visions of what Canadians deserve as part of a universal basic broadband service is myopic and wholly uninspiring.

The extensive reliance on relatively low data caps in Canada constrains what and how people watch TV, listen to music, communicate with one another over the internet and mobile devices, and work. As part of human experience, and critical infrastructure for society and economy writ large, this is a problem.

Information and cultural goods are public goods and paying for them out of the public purse is reasonable and ought to be pursued but commercial media stand steadfastly and vocally opposed to any such expansion of public communication. I propose that we amalgamate Canada Post with the CBC to create the Canadian Communications Corporation, the combined result of which could operate as the 4th National Wireless Company, Broadband Provider in remote, rural and under-served urban communities, and Public Broadcaster rolled into one.

Netflix and Google should be able ply the land free as they like within the usual bounds of the rule of law with respect to market power, privacy, copyright, free speech, etc.

It is not unreasonable, however, to talk about levying a “public data resource” royalty on Google in return for giving it a free hand in gathering all the data from our ‘human’ and natural resources that it uses to run Google Search, Android, Google Maps, Google Earth, Google Books, etc. Such a levy could be used to restore some of Statistics Canada’s funding and technical expertise, and the long-form census. At the very least, foreign internet firms operating in Canada should pay taxes like the rest of us. Indeed, rumour has it that Canada is the only country where Netflix doesn’t pay any taxes. Western University Professor Sam Trosow is right: we must think about information policy in a holistic way.

Whereas the Competition Bureau folded in its antitrust investigation of Google last week the day before the European Commission opened up a second prong in its antitrust case against the digital behemoth – the first with respect to its dominance of EU search markets, where it often has a market share over 90%, the latest a new front targeting Google’s leveraging of its Android operating system to gain prime real estate on people’s mobile devices for the its Play Store, Chrome Browser and Search to the exclusion of other competitors and a different range of preloaded functions, capabilities and apps – there is still time to take another look in light of the fuller view being brought into focus by Joly’s DigiCanCon review and the CRTC’s ongoing #TalkBroadband proceeding. We need a “whole of government” approach, and so far, that is missing in action.

What are regulators doing?

They are:

Unbundling the Network: Partially. Hesitantly. . . . Slowly turning from a systems and broadcast-centric view of the world to a lego-land, telecoms-internet-mobile wireless centric view of the world – skinny basic, untied streaming tv services like Shomi and Crave, and pick-and-pay TV are just the start (for an early vision along these lines, see Huber’s The Geodesic Network II).

The CRTC and the previous government have made the high levels of concentration in mobile wireless, broadcast distribution undertakings (DBUs) and television a centre-piece of their proceedings and policies.

They are rediscovering market power

The CRTC called a spade a spade in its Wholesale Mobile Wireless decision last year, for instance:

Bell Mobility, RCP [Rogers], and TCC [Telus] collectively possess market power in the national market for GSM-based wholesale MVNO access (CRTC 2015-177, para 88).

The Competition Bureau’s findings were crucial to this outcome, although its appearance before the CRTC hearing on the matter was abysmal.

They have rediscovered and applied section 27 of the Telecommunications Act in three cases: Wholesale Roaming investigation 2014-398; Wholesale Mobile Wireless Decision 2015-177; Mobile TV 2015-26.

The Wholesale Roaming investigation 2014-398 found that wholesale mobile wireless roaming rates were “clear instances of unjust discrimination and undue preference”; banished exclusivity provisions in wholesale roaming agreements; and opened a wider examination into wholesale mobile wireless services that led to the second-shoe falling, the Wholesale Mobile Wireless Decision 2015-177.

In Wholesale Mobile Wireless Decision 2015-177 the CRTC re-asserted its authority to regulate wholesale mobile wireless facilities and rates, set temporary caps on wholesale roaming rates and called a Phase II costing proceeding upon which it will set out new guidelines for wholesale wireless roaming rates.

The Mobile TV 2015-26 Decision did four things.

  1. it found that Bell and Videotron were giving themselves “an undue and unreasonable preference” by “providing the data connectivity and transport required for consumers to access the mobile TV services at substantially lower costs . . . relative to other audiovisual content services”.
  2. the CRTC concluded that this was bad for competition, the development and growth of new OTT services, and for consumer-citizens.
  3. it drew a sharp line between transmission (common carriage) and broadcasting (content). In so doing, it forced Bell, Shaw and Rogers to bring their Mobile TV offerings into compliance with some of the common carrier principles flowing from section 27 of the Telecommunications Act.
  4. it acted on the well-founded and meticulously researched and formulated complaint by a citizen and now Ph.D. student in the School of Journalism and Communication at Carleton University, Ben Klass.

Return of the State and Zombie Free Markets

That the previous government’s actions and ongoing regulatory intervention in the market is substantial in Canada is beyond doubt. At the same time, however, this is not unique. We have seen the “return of the state” in many countries. In the real world, the effective operation of “real markets” depends on the rule of law and the firm hand of independent regulators, back-stopped by, yet independent from, politicians, policy makers and the Ministers whose bailiwick it is to see that good things happen (in this case, this is Minister Navdeep Bains at Innovation, Science and Economic Development and Minister Melanie Joly at Canadian Heritage).

In terms of what has been done in recent years, we have had spectrum auctions aplenty, explicit spectrum set asides for new cellcos, regulated wholesale mobile wireless roaming rates, adoption of the Vertical Integration Code, the stripped down ‘skinny basic’ TV with a price cap, the push to keep over-the-air TV alive in so that the digital switch over of a few years back might bear fruit and become a thorn in the side of cable, satellite and IPTV companies whose rates continue to climb much faster than inflation, and the forced unbundling of tv channels.

All of these steps run counter to some of the companies’ – especially Bell and Shaw, but less so Rogers and QMI — ‘walled garden/information control’ models of operation. Having banked on such a model (and with the banks, especially RBC, holding significant ownership stakes in most of the key players), the push back against these efforts to limit the companies’ ambitions are coming from some of the most powerful forces in the land. Such push back can be seen, for example, in:

  • Bell’s recurring editorial interventions in the country’s biggest TV and radio news media outlets;
  • litigation (e.g. against the Mobile TV, Wireless Code, Superbowl Simsub rulings from the CRTC);
  • a Petition to Cabinet to overturn the CRTC’s forward looking wholesale access to fibre-to-the-X ruling;
  • threats of capital investment strikes and a bevy of other efforts to turn back the tide.

So what are the limits to this newly interventionist Regulatory State?

First, while the CRTC has rediscovered section 27 of the Telecommunications Act – the no undue preference clause – we must remember that it is followed immediately by section 28, which those in the know see as saying that carriers cannot give undue preference EXCEPT when doing so advances the objectives of the Broadcasting Act. This puts the best bits of the telecoms act at war with itself and risks subordinating telecommunications – broadband internet, basically – to broadcasting.

Such waffling runs counter to the principles of telecommunications upon which the open internet and mobile phones are built — tried and trued principles that come down to us in section 36 of the Telecommunications Act from Roman Roads, Venetian Canals, and the Taxis family courier service in medieval Europe.

Moreover, while one might argue that section 36 should be the crown jewel of the Telecommunications Act, there has been an extreme reluctance to use it. Why?

Regulatory hesitancy seems greatest on this point. This is evident in its almost complete lack of use during a time when those who own the media have become so inextricably intertwined with the ownership and control of messages. It is also evident in the exception carved out for over-riding this principle if it meets some ill-defined objectives of the Broadcasting Act. It is time to wheel section 36 out of storage and put it back in place as the crown jewel around which the entire set-up of the evermore internet- and mobile wireless-centric universe revolves.

This hesitance was also visible in the Mobile TV, a case in which content — and the carriers’ control of it — is very much front and centre. While drawing a sharp line between carriage and content, however, the CRTC refused to reach for the bedrock of common carriage: section 36. This seems to mark the outer limits of where it seems willing to go and in continuation with the fact that this section has been largely dormant over the years.

While the decision to kick some new life into section 27 is to be applauded, and the increased willingness to constrain the power of vertically integrated companies by loosening their grip over the basic building blocks of the network media ecology – spectrum, wholesale mobile wireless facilities and roaming rates, data transport and content – and sharpening the lines between carriage and content is great, much more is needed.

Like what?

5 Modest Suggestions + 1 Big One + 1 Radical One.

  1. Eliminate section 28 of the Telecommunications Act;
  2. Eliminate section 4 in the Broadcasting and Telecommunications acts so that both pieces of legislation can talk to one another (we don’t need new legislation and any attempt at such will only ensnare us in interminable delay and special (corporate) interest pleading;
  3. Breathe new and vigorous life into section 36 by firmly separating control over the infrastructure from influence over the messages / content flowing through the pipes / ether. Sharpen and harden the line between carriage and content. Any proposals to use a levy on ISPs and mobile phones to fund CanCon should be given a stillbirth. While the entrenched clients of the existing broadcasting system never miss a beat to promote “the ISP tax”, these ideas are out of synch with the times and the tastes of the people. They are anti-internet and prolong “a systems” view of the world that conceals a murky labyrinth of cultural policy funds flowing from one pocket to another, often within the vertically-integrated companies.
  4. Impose vertical separation along functional lines between carriage and content, and between wholesale access to passive network infrastructure and network operators and retail telecoms service providers.
  5. Transfer authority over spectrum from Industry Canada to CRTC.

1 Big Proposal

  1. Eliminate the whole category of broadcast distribution undertakings (BDUs) upon which the cable, satellite and IPTV industry is based. It’s all telecom-internet access and carriage now. Take the funds funneled into the Canadian Media Fund from BDUs directly out of the general treasury.

More generally, we need to think about bringing subsidies for broadband connectivity into line with funding for the CBC and Cancon. Currently, the CBC receives $33 per person per year, with nearly three-quarters of that amount again for the arts and culture at large. Broadband internet subsidies, by contrast, are a comparative pittance at roughly $2 per person per year.

I do not think that Canadian citizens would chafe at upping that amount to somewhere between what Sweden spends on broadband internet access subsidies (an average of $5 per person per year) and the CBC ($33 per person per year) (see sheets 3 & 4 here). Any bid to pare back the CBC and other arts and culture funding should be dismissed out of hand. We are not big spenders when it comes to arts, culture and Cancon, and generally at the lower end of the scale. In short, there’s little room for cutting, although how subsidies are organized, allocated and used are other matters altogether and surely up for grabs under the sweeping review that Minister Joly is spearheading.

1 Radical Proposal: The Canadian Communication Corporation (C3)

Merge Canada Post with the CBC to create the Canadian Communication Corporation (CCC) with a mandate to become the fourth national mobile wireless provider; blanket cities with open access and light up the vast stock of under- and unused municipal dark fibre; extend public wifi; extend broadband internet access to under- and unserved people in rural, remote and poor urban areas; create, disseminate and make public art and culture as accessible and enjoyable as possible, and fund it from the treasury not by an opaque labyrinth of intra- and inter-industry funds overseen by a fragmented cultural policy bureaucracy.

The original goal of the U.S. Post Office was to bring “general intelligence to every man’s [sic] doorstep”, while also serving as a heavily subsidized vehicle for delivering newspapers (John, 2010; Starr, 2004). The CCC could be to the broadband internet and mobile-wireless centric world of the 21st century what the Post Office was to the print world of times past.

The CCC could repurpose some of the CBC’s existing spectrum holdings and broadcast towers for mobile wireless service coast-to-coast-to-coast, real estate could be combined and used to site towers, local post offices used to sign up cellphone subscribers and sell devices, and Canada Post vehicles given more windshield time making sure that the country’s system of correspondence, communication and parcel delivery run as they should.

Postal workers are giving some thought to renewing the post office for a broader sense of purpose, but have not ventured into this territory — yet; at the same time, informal discussions with some Canada Post senior execs suggest that this isn’t the first time they have heard of such ideas. Equally important, I don’t detect any inherent hostility against them.

Maybe it is time to discuss a #RadicalMediaPolicy4Canada? With two official proceedings underway, maybe we can broaden the terrain with a third?

* This post reworks ideas first presented at the Forum for Research and Policy in Communication’s Rebooting Canada’s Communication Law at the University of Ottawa, May 22, 2015. Thank you to Monica Auer for inviting to present there.

Telus Trifles with Telephone History to Service its Constrained View of Universal, Affordable Broadband Internet Access Today

Setting the Stage

Today, the CRTC enters week two of its major review of affordable basic telecoms service in Canada. The key issue? Whether universal, affordable basic telecoms services should be expanded to include broadband internet access and, if so, at what standards of speed, quality and affordability, and who should pay for it all.

Some of us argue that the goal of affordable, universal broadband service needs to be defined broadly. Others, such as Telus, argue that it should be drawn very narrowly to include only services based on needs not wants. In Telus’ restrictive view of the world, basic broadband internet access should support email, web browsing and maybe a couple of e-commerce activities but not over-the-top video services or H-D two-way interactive gaming. If the CRTC is to adopt a broadband speed target at all, Telus says, it should be no more the 5 Mbps down, 1 Mbps up (see its second intervention, paras 90-91).

To support its view, Telus hired two experts to critique the work submitted by those who argue for the more expansive view, including that of your’s truly. The gist of my submission is that affordable universal service is a concept that is not static but changes with developments in technology and society. I also argue that the politics of universal service involved in working this out are coterminous with the history of general purpose communications networks from the post office to the telephone and now the internet.

In the US, for example, this began with the post office starting with the Postal Act of 1792, and whose mandate was “to bring general intelligence to every man’s [sic] doorstep”, while also serving as a heavily subsidized vehicle for delivering newspapers across the country with the aim of helping the nation’s journalism flourish (John, 2010, p. 20; Starr, 2004). In short, universal postal policy was also about press, information, social and economic policy, all rolled into one.

I then argue that people agitated for such goals in relation to POTs (plain old telephone service), libraries and broadcasting. That they are doing so now in relation to broadband internet access is no surprise.

Indeed, in Canada and the US people pushed hard to transform the telephone from the late-19th and early 20th centuries from a luxury good and tool of business and government into a social necessity (Pike & Mosco, 1986), and a popular means of interpersonal communication. In an all-IP world, people are building upon this history by not only bringing intelligence to every citizens’ doorstep but by helping to make that doorstep the perch from which we can see and speak to the world.

Hired Guns, Weird Timeframes and Looking for Keys Under Lampposts

In line with Telus constrained view of basic service, its hired expert, McGill Political Scientist Richard Schultz writes that we need to clear away the many misconceptions and myths that exist about how “universal service became part of Canadian regulatory and policy debates” (para 2). Taking aim at my intervention specifically, Schultz asserts that

. . . perhaps no single statement in the various submissions epitomizes the problems . . . than the following from the Canadian Media Concentration Research Project first intervention: “Policy makers have struggled for over 100 years how best to achieve universal telecommunications service” (para 4).

Purporting to set the historical record right, Schultz argues that we need to do two things: first, to look at the period “from 1906, or more precisely 1912” up to around 1976, followed by another thereafter” and, second, search for explicit statutory statements where universal basic service is set out as a formal legal requirement for basic service, with the assumption being that the absence of such statements means that there’s never been such an idea in Canada and that claims to the contrary are just hollow rhetoric.

After doing what is akin to a text search of the relevant laws and coming up empty handed, Schultz concludes that there never were such politics over, or legal basis for, universal service in the late-19th or early-20th centuries and, in fact, that such issues were largely ignored. To the extent that such issues were given attention at all, he argues, the impetus came from enlightened corporate leaders at Bell and other telephone companies rather than politicians, policy makers or the public at large – in other words to the extent that universal service existed at all, it was an act of noblesse oblige (paras 5-9). Moreover, according to Schultz’s telling, to the extent the regulators and policy makers have played a role in bringing it about, universal service is of recent vintage.

Shultz’s arguments are curious for two reasons. First, the date that he begins with ignores vitally important points that predate 1906, while ignoring or giving short shrift to events within his selective timeframe. Second, the idea that a text search for “universal service” in the relevant legislation that comes up empty handed supports the conclusion that the idea was non-existent is like the proverbial drunk looking for their keys under the lamp post.

History Cut Short: Looking Just Outside the Weird Timeframe . . .

Let’s deal with the start date that Schultz selects first, i.e. 1906. This date is plausible because this is when telephone companies were brought under the remit of the Railway Act of 1903 and the purview of the first regulatory board in Canada, the Board of Railway Commissioners. Yet, starting in 1906 is fundamentally wrong for many reasons. For one, if we start just a few years earlier, we see that the adoption of the Railway Act was predicated on the idea that there are certain industries so fundamental to the economic and social life of the nation that they are imbued with a public interest and an “obligation to serve”. Railways came first, telegraphs and telephones next.

Statements aplenty to this effect underpin the legislative history of the Railway Act, and when telegraph and telephone companies were brought under its purview three years after its adoption the same principles automatically applied. Thus, when the Railway Act was expanded to include telephones in 1906, there was no need to be explicit about the “obligation to service” because that was baked into the statutory basis upon which railway, telegraph and telephone regulation was based. In short, there was no need to state the obvious.

The classic text on such matters, Alfred Kahn’s The Economics of Regulation: Principles and Institutionsprovides an excellent introduction to businesses cloaked with a public interest, their obligation to serve, and the role regulators play in using the best available knowledge and experience to decide how such matters will be dealt within in any particular instance (see pp. 3-5, for example). These are the guiding rules and principles of regulation, not legislation, although regulators’ authority to do what they do is and must be grounded in laws that give them the authority, mandate and legitimacy to take the steps they do.

Schultz’s start date of 1906 is especially odd given the monumental inquiry into the telephone industry convened just one year earlier – 1905 — by the Liberal Government of Prime Minister Wilfrid Laurier, otherwise known as the Mulock Committee, after its chairperson and Postmaster General at the time William Mulock. The Mulock Committee helps to put the CRTC’s review of the basic service obligation in perspective given that while the Commission will hear from 90+ intervenors over three weeks, the Mulock Committee heard from many more during its forty-three days of hearings and thousands of pages of testimony.

As part of the public record, it received interventions from members of the public, co-operatively run telephone companies, municipal governments, foreign telephone systems and experts, and Bell management, among many others. It was an enormous undertaking, and one that underscored the fact that achieving some measure of public control – i.e. regulation in the public interest — over the telephone network was of the utmost importance.

Contra Schultz and Telus’ claim that issues of universal service were missing in action during this early period of telecommunications history, voices aplenty called for accessible and affordable telephone service at this time, not just for the business classes who were its main users but for all classes of the public. One among many, the Manitoba Government’s submission, for example, highlighted these points as follows:

. . . the telephone is . . . one of the natural monopolies, and yet is one of the most . . . necessary facilities for the despatch of business and for the convenience of the people . . . .[T]he price . . . should be so low that labouring men and artisans can have convenience and advantage of the telephone, as well as the merchant, the professional man and the gentleman of wealth and leisure” (Manitoba Government to Mulock Committee in 1905, quoted in Winseck, 1998, p. 137).

If this is not a call for affordable service, I am not sure what is. The only reason they are missing for Schultz and Telus is because such activities fall outside of their self-selected – and odd — time frame that begins a year after the biggest inquiry into the telephone and public service in the 20th Century occurred (except maybe the proceedings dealing with the introduction of competition in the last twenty-five years of that century).

We can also go well beyond 1906 and the Railway Act, or 1905 and the Mulock Telephone Inquiry, to the first days of the Bell Telephone Company of Canada’s operations to add further insight into the history of universal telecoms service. Thus, in 1882, Bell’s founding charter was revised to include the touchstone phrase that its operations were to be conducted and overseen by the federal government for “the general advantage of Canada”.

A few years later, and a decade before the United States pursued the same course of action, the federal Patent Commissioner voided Bell patents because Bell was not making enough use of its equipment in Canada and blocking access to those who might (see MacDougall, 2013, p. 43). Municipalities also chafed — and told the Mulock Committee as much – at how their weak powers under the federal government’s authority and the “general advantage of Canada” idea in Bell’s charter constrained their capacity to grant competing franchises, regulate rates and adopt other methods that might help extend the telephone beyond a small number of business users to make it more accessible and affordable.

And when competition did break out, as in Montreal in 1888, for instance, Bell launched a ruthless price war with its rival, the Federal Telephone Company, until the latter capitulated and sold out to Bell three years later. In Winnipeg it created a “dummy company”, the People’s Telephone Company, to give the illusion of competition; while in Peterborough and Dundas, to kill new independent telephone companies, Bell gave away service for free. Yet, all this, too, is ruled out by the self-selected time frame that Schultz imposes on the subject.

When Kingston joined the Ontario Municipal Association in 1903 to adopt a resolution calling for municipal authority to regulate telephone rates, Bell threatened not to renew its franchise and to withhold further capital investment. In the same year, the Mayors of the Montreal suburb of Westmount and Toronto, William Lighthall and Oliver Howland, respectively, spearheaded a drive to gain greater regulatory authority over telephone rates for municipalities while calling on the federal government to take control of the long distance network. By 1905, 195 municipalities had joined the call, with support from the Montreal and Toronto business associations and the farmers’ association, Dominion Grange (also see MacDougall, 2013, pp. 44-46, 125-127; Winseck, 1998).

In an immediate sense, the cities’ calls largely fell on deaf ears at the federal government. As a result of this drift of events, in 1902, 1-in-50 Ottawa citizens had regular telephone service. The upshot, as Bell Canada President Charles Fleetford Side never missed a chance to stress, was that the telephone was treated as a luxury not necessity.

It was against this backdrop, however, that Prime Minister Wilfrid Laurier’s Liberal Government convened the Select Committee on Telephones in 1905. However, none of this even merits a mention in the hired expert report that Professor Schultz has prepared for Telus and submitted to the public record of the CRTC’s current review of basic telecoms service. In short, those parts of the historical record that don’t fit Telus’ restrictive view of universal telecoms service are simply omitted from Schultz’s account.

Inside the Timeframe Things Disappear

Missing, also, is the fact that all three prairie governments effectively nationalized their telephone systems between 1906 and 1909 largely because, as Manitoba had told the Mulock Committee, Bell refused to extend its network in the province or to make the service more affordable for more people. During this time, Bell vacated the field as prairie governments took over telephone service between 1906-1909 in Manitoba and Alberta, although with Saskatchewan following the ‘Scandinavian’ model whereby the government initially owned the long distance networks while cities and cooperatives built up the local networks (MacDougall, 2014, p. 190).

In addition, far from the folding of telegraph and telephone companies into the purview of the Railway Act being an inconsequential gesture, as Telus and Schultz suggest, Canada’s first regulator – the Board of Railway Commissioners — cut its teeth on a wide variety of issues that all had to do with carving out what it means to set public policy and regulate businesses affected with a public interest, to use Alfred Kahn’s terminology. Thus, and for instance, even though some people suspected that the Government had simply shelved the recommendations of the Mulock Committee, the report helped to set the zeitgeist and in the next few years the BRC found its footing on ground made solid by the extensive proceedings that had just transpired.

Thus, between 1908 and 1915, the BRC displayed the will and room for independent action needed to increase the availability of affordable telephone service to business and all classes of people alike. For instance, the BRC nullified the then widespread exclusive contracts that Bell had hitherto sewn up with railway stations – the main centers of commerce and the flow of people – across the country. The provisions in the Railway Act requiring telephone rates that were “just and reasonable” were also given new life; as were those that required that rates and services be offered in a manner that was “not unjustly discriminatory or unduly preferential” (Railway Act, c. R-2).

Standard technical interfaces allowing interconnection between Bell and independent telephone companies were adopted, and telephone companies were required to file their tariffs with the BRC. In 1910, the BRC made a landmark ruling that brought common carriage into the purview of telecommunications in Canada as well, and which remains a defining pillar of the Telecommunications Act (sec 36) to this date.

The BRC also began systematically collecting data on Bell and other telephone companies with respect to rates, miles of telephone line and the number of exchanges in operation, people served, workers employed, and so on and so forth. The first monitoring reports, Telephone Statistics, were published. The number of independent telephone companies soared from 530 in 1912 to 1700 by 1917, accounting for half of all subscribers at the time. To be sure, the exact phrase “universal service” may not appear in these efforts, and the aims of such an objective were not achieved, but its spirit – in bits and pieces and the totality of the record – is undeniable.

To be sure, while Bell struck a tone then that was as parsimonious as the one Telus is striking now, it was not completely tone deaf to the drift of events taking place. Thus, while the Bell Telephone Company of Canada’s long-standing chair, Charles Fleetford Sise was renowned for his penny-pinching ways and emphasis on serving only high-end business users who appreciated the high quality of the company’s networks and didn’t mind paying the price to do so, by 1912 even he seemed to be changing his tune.

Thus, in Bell Canada’s Annual Report of that year, Sise is quoted as follows:

. . . In 1906 the operation of the Company was placed under the supervision of the Railway Commission, which has considered several matters brought before it for adjudication, and has, in its conclusions, acted in an impartial and judicial manner.

Our relations with the Public continue to be very satisfactory, and the general feeling now seems to be that the telephone service to be perfect must be universal, intercommunicating, interdependent, under one control…and that rates must be so adjusted as to make it possible for everyone to be connected who will add to the value of the system to others (emphasis added, Fetherstonhaugh, 1944, pp. 224-225).

This is hugely important because, in Schultz’ words, to the extent that we had universal service at all, it was because the companies gave it to us out of the goodness of their hearts. Yet, here is Sise saying something very different, and in his account, the regulator looms large.

Schultz also draws on Milton Mueller’s (1998) history of universal service in the US to argue that the concept of universal service didn’t really mean what we think it means, but rather was more of a technical concept that referred to a single system (i.e. a monopoly) available everywhere rather than to everyone at affordable rates (see paras 30-31 in Schultz). Again, Sise’s words suggest something different.

The Politics of Telecoms Policy and Universal Service Restored

While Sise was likely singing from the same hymn sheet as the American Bell, the reading that Schultz tries to impose is at odd with a broader reading of Bell and its management’s stance within the context of the politics of the progressive era in the US (circa 1890-1920) when people like AT&T boss Theodore N. Vail worked harder than ever to reconcile a nascent kind of big business capitalism that his company represented, large technical systems of which the telephone system was an example par excellence, and the public interest (see Sklar, 1988, for example). All of these ideas were at play and expressed from a wide variety of positions, from the narrow and technocratic (Walter Lippmann, for example), to the broad and expansive (John Dewey). Even on the face of it, Sise’s invocation of a telephone service that is universally available at rates that “make it possible for everyone to be connected” chime with such views while also resonating strongly with our modern conceptions of universal service.

Suffice it to say that Schultz’s fundamentally flawed account of the history of universal service carries on throughout the period he covers. To be sure, there are times, for example in the post WWII era in which the politics of telecommunications and universal service did fade into the woodwork, but that, I would argue, is due to the “corporatist politics” and social settlements of the era. This meant that such matters were attended by those directly involved: the telephone companies, the regulators, and to an extent the telephone company labour unions. Indeed, when telephone regulation rested with the Board of Transport Commissioners (1938-1967) and then the Canadian Transport Commission (1967-1976), respectively, they did take a particularly technocratic and narrow view of things whereby, rather than hearing from people directly, they believed that the company engineers and economists appearing before them were best placed to deliver insights and results that were in the public interest.

The Public Returns and the Public Interest is Revived

That kind of thinking was also prevalent in the US at the time, as well. Crucially, however, it was also rejected in the landmark United Church of Christ case in 1966 when the Courts scolded the FCC into a new way of thinking by arguing that the only way to know what the public interest is, was to have the public in front of the FCC to tell them what it is. The doors to the FCC swung open and the preceding phase of corporatist politics was jettisoned in favour of public participation as a result.

The CRTC followed course a decade later, in 1976, but on its own accord after its remit was expanded to take over telecommunications from the Canada Transport Commission. Immediately upon taking over telecoms, the CRTC candidly announced the following:

… In a country where essential telecommunications services are provided largely by private enterprise with some degree of protection from competition, the public interest requires that those services should be responsive to public demand over as wide a range of possible, and equally responsive to social and technological change.

The principle of “just and reasonable” rates is neither narrow nor a static concept. As our society has evolved, the idea of what is just and reasonable has also changed . . . . Indeed, the Commission views this principle in the widest possible terms, and considers itself obliged to continually review the level and structure of carrier rates to ensure that telecommunications services are fully responsive to the public interest.[1]

Indeed, these ideas and values stand as a consistent thread between then and now: the Commission sets what constitutes basic service in light of constantly evolving technological, economic, social and political realities. That such ideas were in the air at the CRTC in the mid-1970s was also not anomalous but part and parcel of the times as well. Schultz offers a glimpse of this when he mentions the Department of Communication in passing (see para 46). However, the DOC is more important than he leads on. It articulated a broad vision of the “wired society” that it saw as being on the immediate horizon as broadband networks converged with computing and a cornucopia of information and media services to become the infrastructure of society in the near future. We’re here now, even if Telus hopes that the DOC’s broad vision is not.

Such ideas play little role in Schultz’s account and thus in helping us understand universal service and its evolution over time. They are part of what he thinks is a moment when the politics of universal service does emerge for the first time, but they are not given the gravitas that they probably deserve nor are they stitched into the flow of time – backwards or forwards – in ways that they need to be. As a result, the argument that was the closing decades of the 20th Century there were a watershed moment when the values, ideas and politics of universal telecoms services emerge for the first time is incorrect, for all of the reasons indicated above.

Look Where Things Are Not Where the Light Shines Brightest

Finally, and as I told the Commission last week and in my response to Telus’ questions to me earlier, most countries do not legislate specific affordable broadband service targets. Instead, the normal practice is to pursue broadband targets as a matter of public policy, developed and back-stopped by regulators and policy-makers that have the legal and political mandate to do what they need to do to achieve outcomes that are in the public interest. And this is as it is in Canada as well.

Ultimately, Schultz’s history is fundamentally flawed. Its main function appears to be to marshal scholarly credibility and legitimacy in the service of those who seek a specific, strategic outcome. It is a poor piece of research and hopefully will be given very little attention by the Commission, or anyone else for that matter.

Universal service for an all-IP world is something that we have to arrive at. It will not be easy. But an already difficult task won’t be made easier by those who use and abuse history for their own strategic ends.

 

[1] emphasis added, CRTC (1976). Telecommunications Regulation – Procedures and Practices (prepared statement). Ottawa: Minister of Supply and Services.

Guilty Pleasures and Proper Needs: Who Gets What Kind of Internet, and Who Decides?

On Tuesday night I joined several other speakers at the Internet4All public forum held by ACORN, an advocacy organization that works on behalf of low- and moderate-income families in cities and neighbourhoods across Canada. The event was part of the run up to today when ACORN and its other partners in the Affordable Access Coalition[1] plan to tell the CRTC basic telecoms service review that broadband internet access is expensive and out-of-reach not just for people in rural and remote areas – the focus of many of the presenters in the first three days of the Commission’s review – but for people with low incomes in cities across the country as well.

ACORN’s Internet4All Public Forum

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The link between income, affordability and internet adoption is clear, even if the exact causal links between them are not. Thus, while 80% of households in Canada subscribe to the internet from home, 2-out-of-5 of in the lowest income bracket do not, and one-out-of-every-three Canadians do not have a mobile phone. At the top of the income scale, in contrast, adoption levels are close to universal at over 95% for both. The figure below illustrates the points.Screenshot 2016-04-12 16.48.03.pngWhile some wonder if this is because some people might not want to use the internet, the strong relationship between income and adoption suggests that this is not a choice but a function of affordability. Moreover, study after study tell us one thing: that the price of broadband internet and mobile phone services in Canada are high by the measure of all respectable studies of the issue (see, for example, the Wall, OECD and FCC reports). The high prices these studies document might account for a modest portion of the budget for the “average Canadian”, but for low- and modern-income families they compete with putting food on the table and a roof over their heads.[2]

Such realities also help to describe why, at best, ‘wired broadband internet’ adoption rates in Canada fare only reasonably well compared to other developed countries, but terribly for mobile wireless services. That affordability is clearly an issue is also illustrated by the fact that in Toronto, for example, just 20% of households in public housing communities have broadband internet service. These are the realities that are motivating ACORN members, and why the advocacy group is going to the CRTC today.

While the industry has done little to counter these realities, at least one has taken voluntary steps to help ameliorate the problem for some: Rogers. In 2013, it launched its ‘connected for success’ initiative with the aim of bringing affordable broadband internet access to 58,000 low income families in Toronto public community housing. Last week, Rogers came to the Centretown Citizens Ottawa Corporation to announce that the program is being extended to 150,000 families in 533 public housing communities in Ontario, New Brunswick and Newfoundland & Labrador for the next two years.

In its expanded “connected for success” initiative, Rogers offers broadband internet with speeds of up to 10 Mbps download and up to 1 Mbps upload, with data caps of 30 GB, for $9.99 per month. As a voluntary effort, this is certainly a step in the right direction.

At the same time, however, announced on the eve of the CRTC’s review of the basic telecoms service it is hard not to see the venture as a fine example of “regulation by raised eyebrow”, wherein just the threat of regulatory action brings about some gestures toward the desired results.

The people attending ACORN’s internet4all forum also suggested that while Rogers’ focus on non-profit community housing is good, the vast majority of low-income families do not live in social housing but market housing. Who will serve them?

In Ontario alone, 168,000 families were on the waiting list for community housing last year. This is more than Rogers is targeting across all of Central and Eastern Canada! For them, the cheapest option Rogers offers is its newly launched “Internet 5” service, but it offers only half the speed of the public housing option and is three times the price, once the cost of renting the modem is factored in.

Perhaps the biggest drawback is that these services are designed for individuals rather than households with several family members who might be running multiple devices at the same time, as Rogers’ own marketing materials on its website indicate.  It is not just that the speeds are slow but that the data caps for both services — 30 GB for the public housing version, 25 for the latter – are exceedingly low. Cisco, in contrast, estimates the average Canadian household used 56 GB in 2014, and is expected to reach around 180 GB by 2019.

Figure 2: Rogers Internet Service Plans Compared

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And what about the punishing overage charges that come along with those low data caps? On this, many of those attending the internet4all event the other night had a lot to say. Lastly, what happens to those who sign up for “connected for success” when the program meets its expiry date in two years?

Some argue that some access is better than none. More specifically, there are those who assert that when it comes to defining basic internet service, the aim is to give people basic broadband internet based on need rather than wants and desires.

We have certainly heard a lot of this kind of thinking already. Telus, in particular, argues that the only change the CRTC should consider is making the current “aspirational target” of 5 Mbps up and 1 Mbps down for all Canadians a formal obligation (see here, for example). In response to all those who claim that the standards of 25 and 30 Mbps up and 3 down adopted in the US and 28 EU countries, respectively, and that apply to all citizens and  which must be met, as the FCC in the US puts it, a “reasonable and timely fashion”, Telus says humbug.

Over-and-against the view that anything less than these standards are not up to how individuals and families actually use the internet, especially in terms of viewing video and using multiple devices at the same time, Telus takes a flinty eyed view to argue that things like

. . . email access, web browsing and e-commerce . . . are the services that are necessary for meaningful participation in the digital economy. It is not reasonable to include over-the-top video and H-D two-way interactive gaming as essential applications that must be supported by Internet access faster than TELUS’ recommended 5/1 Mbps BTS (Telus, paras 90-91).

The Commission also appeared to strike a similar note when Chairman J. P. Blais kicked off proceeding Monday morning with the remark that the basic service objective must be firmly grounded in evidence, and that “it is crucial not to confuse ‘wants’ with ‘needs’”. Some chimed in immediately that Blais’ words reflected a “disciplined start”, while the CBC, in contrast, interpreted the remarks to imply that the Commission had already trimmed its sails and people ought not to expect much. Already by the end of first day, however, the Commission seemed to soften its tone.

Drawing the lines between basic needs and productive uses along such lines and whatever else people might do with their internet connections smacks of a long and hoary history where people have been told that what they use the media at their disposal for should take a backseat to more “important” uses, and consequently frowned upon and discouraged as a result. When I expanded on this idea at ACORN’s Internet4All forum, people got up one after another to give rhyme and verse on why such distinctions are not only wrong-headed but objectionable.

Why should people and families with low incomes — precisely the ones most likely to “cut the cable cord” to save money — be told that watching TV is beyond the pale. Isn’t it enough that they be able to do so without affordable basic internet access being hedged about by so many narrow and utilitarian values as to rule out such pleasures?

On this point, I heard much about Netflix and cartoons, and how telling stories, art and culture are essential to who we are as human beings, to our imaginations, and how we express ourselves. The gentlemen who relayed the bulk of this line of thinking will be there to tell the CRTC the same today.

And what about using the internet to get the news, a point that Chairman Blais also appears to fully grasp, given his remarks that with the French language newspaper LaPresse being available online only now, people have to have an internet connection to read it? This chimes with the results of a recent Statistics Canada study on how people “get the news”. As the video component of online news grows, it is going to become a lot harder to carve out this bandwidth intensive aspect of online news from the low capacity text based part.

Another person observed that as government departments put more information online they are also putting it online in video form. She pointed to Health Canada videos on palliative care and diabetes to illustrate the point, and to the essential role that these videos play in educating people and raising awareness about both conditions. How to distinguish between such “worthy” forms of high bandwidth intensity video and the frivolous kind we don’t hold aloft?

Another woman spoke about how her hearing impaired partner communicates regularly with her family back home in Australia by video and how doing so is not only crucial to their relationship but to her partner’s mental well-being more generally. Then there was another woman who spoke of coupon cutting online because, well, all the coupons are now online, and so too, by the way, are most of the rental housing advertisements.

A young man came up afterward and spoke to me about working a grueling 70+ hour work week throughout high school because both of his parents were on the Ontario Disability Support Program (ODSP), and the income they received was not enough to make ends meet. Despite being in the “gifted class” at Lisgar Collegiate here in Ottawa, with an average over 90%, his role of main family breadwinner meant that he had to drop out, unable to meet the competing demands of doing both. Yet, a few years later he completed an internet-based high school course, much of it based on instructional videos and video conferencing. He’s now at Algonquin College with hopes to complete his studies at Carleton when finances allow.

Another helped a friend faced with a $190 repair bill for a broken washing machine that she could ill afford. Instead of calling the Maytag repair guy, he turned to Youtube, found a $3 solution, and his friend kept her much needed money for other pressing uses. As a recent MTM study observes, nearly two-thirds of all Canadians used Youtube to learn how to fix or do something in the last year.

Of course we can pile up anecdotes like leaves in autumn but the point is, that even those of us who study these matters full-time don’t have a clue about many of the things that people do with the internet, for both pleasure and productive purposes. I see little way to effectively distinguish between the two and don’t think that much good will come from trying.

That we don’t know the half of what people do in their uses of media comes as no surprise to communication scholars because if the field teaches anything, it teaches that people use communication technologies in unintended ways and that this in turn pushes those technologies along unanticipated paths of development. Any effort to distinguish between “basic” uses that people should have access to as part of an affordable broadband internet obligation and those they shouldn’t risks running roughshod over these lessons. Worse, it risks substituting the regulator and carriers’ judgments for what people themselves are in the best position to decide.

As I pointed out in my testimony to the Commission the other day, providing people with affordable, universal broadband internet in the 21st century is a necessity, and it is in line with what we have done historically in Canada in relation to plain old telephone service. And it is in line with what other countries comparable to ours are doing around the world.

To be sure, this is going to cost money, and that means that somebody’s going to have to pay and who ultimately pays will be us — citizens and taxpayers. I do not see a problem with that.

Total federal subsidies for broadband internet development and affordable prices in Canada are at the very low end of the scale at around $2 per year. This is similar to what people in Bulgaria, Romania and Austria invest, whereas I think we could easily move into the middle of the pack to spend, say, $4.50 to $12 a person per year as they do — that is 40 cents to a buck a month extra on our internet bills — in Sweden, Estonia, the UK, Germany and Finland to subsidize internet development (compared to NZ and Australia at $25 and $163, per person, per year, respectively, for their own national broadband initiatives).

Consider this as well: In Canada, compare the $2 per person per year in total federal subsidies for broadband connectivity to the $33 given to the CBC, by contrast. The point is not to bring the latter down to the former by any stretch of the imagination, but rather to bring broadband subsidies closer to those that we give to the CBC (to say nothing of the myriad of other ‘content subsidies’). In the internet age, while content may be king, it is connectivity that is probably emperor. Our public funding arrangements should better reflect such priorities.

Ultimately, any steps to draw lines between frivolous wants that we can cast aside and productive uses that can be folded into basic internet service will likely look, at least in hindsight, like so many similar such efforts in the past: as paternalistic and elitist efforts, and foolish ones at that. The Commission should give little credence to such ideas, and indeed should reject them out of hand. Get the structure of the internet policy framework right, and the rest will likely fall into place as it should.

For these reasons, we need less flinty-eyed, utilitarian outlooks drawn from Victorian England and a more imaginative view of the future, albeit one that is still grounded in what people are already doing with the internet and plenty of room to grow so that all Canadian citizens can use the internet as they see fit, both today and tomorrow.

[1] Which also includes the Public Interest Advocacy Centre, Consumers Association of Canada, Council of Senior Citizens Organization of BC and the National Pensioners Federation.

[2] On this measure, Canada ranks in the middle of comparable EU and OECD countries according to the ITU, see pp. 102 and 109, for example.

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