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Arm’s Length or Strong Arming the CRTC?: Minister Moore’s “Mandate Letter” to CRTC Head Jean-Pierre Blais

Early in December a journalist from the Huffington Post, Althia Raj, contacted me about a letter that she had turned up through an access to information request. Sent by then Heritage Minister James Moore to the, at the time, new chair of the CRTC, Jean-Pierre Blais, on his first day on the job (June 18, 2012) the letter lays out what is expected of the incoming chair in a surprising amount of detail, despite the fact that the CRTC is suppose to be independent from the government-of-the-day.  

In this so called “mandate letter”, Moore lays out a number of “issues of mutual interest” that he hopes he and Blais “can work together on”, while remaining mindful of the fact that whatever cooperation does occur must “maintain[] an appropriate level of distance between our two organizations”.

After initially reading the letter, I was struck by how much I agreed with many of its goals:

  • more room for consumer participation in CRTC proceedings is needed, Moore tells Blais;
  • the Commission needs to “comprehensively address consumer affordability and service complaints”;
  • “consumers should have access to more programming choices and affordable choices across all distribution platforms” (radio, television, broadband networks and mobile devices);
  • more “competition, investment, innovation and consumer choices” is needed in telecommunications services, and all with a light regulatory touch but with a keen eye on “consumer protection and participation”.

While I like the broad contours of the letter, however, I also think it is unusual, and deeply problematic. Why?

First, because there is no precedent, to my knowledge, of a Minister sending a ‘mandate letter’ to a new head of the CRTC laying out what is expected of them.

Second, a ‘mandate letter’ has no basis in the Broadcasting Act (1991) (sections 7-8, 15, 26-28) or the Telecommunications Act (1993) (sections 8, 9 and 12) – the two main pieces of legislation that apply in such matters.  Both laws give Cabinet broad powers to issue policy directions and to review, vary and overturn CRTC rulings (Orders-in-Council), but they do not give the Minister authority to do any of these things, or to send a letter telling an incoming chair of the CRTC what the Minister expects of him or her. 

Third, while the Minister tries to straddle the awkward zone between respecting the CRTC’s independence and framing a mandate around ‘mutual interests’, the very existence of the letter casts doubt on the regulator’s autonomy. As a result, it is impossible to know for certain whether the CRTC’s newfound standing as a champion of the Canadian consumer on Blais’ watch is the fruit of consumer friendly decisions that have rankled incumbent interests, or the unintended prize of serving up just what the Minister ordered?

Three high-profile decisions in particular have defined Blais tenure to date but they could just as easily be seen as fulfilling the requirements of the mandate letter:

  •  the CRTC’s flat out rejection of BCE’s first bid to take-over Astral Media in October 2012;
  • the adoption of a National Wireless Code that came into affect in December;
  • the recently launched inquiry into wholesale mobile wireless roaming rates at the end of December 2013 after its fact-finding mission found the Big 3 – Rogers, Telus and Bell – to be “charging or proposing to charge significantly higher rates in their wholesale roaming arrangements with other Canadian carriers than in their arrangements with U.S.-based carriers.”

Blais seemed to wince when Raj raised the notion that perhaps he was just following orders rather than marching to his own drum. However, he also worked hard to parry the appearance that the CRTC’s might be being used for partisan ends. He had to because, ultimately, the legitimacy of the regulator depends on being seen and believed to be independent from the government.

I do not think that Blais is doing the Minister’s bidding. However, it is naïve to not see the problem here. It is also naive not to see Blais and Moore as at least rowing in the same direction on the ‘consumer friendly’ approach to telecom and media regulation.

The consumer focus of the Conservative Government is real, and Blais appears to have little trouble with that. There is also no doubt that the Government chose Blais because it sees him as ideologically allied with them, and probably because of the close relationship that he and Moore cultivated when the former was a copyright lawyer at Heritage – Moore’s former home turf.

All of this should have been enough without the Minister firing off a letter that only raises doubts about the CRTC’s autonomy while at the same time being of doubtful legal standing or even effectiveness. Furthermore, the letter reinforces views that the Harper Government keeps bureaucrats on a short-leash, while the fact that the letter only turned up through an access to information request only furthers notions that the government prefers to rule in secret rather than in the light of day.   

Curious to know what others thought about this, I canvassed scholars, lawyers and former high-ranking bureaucrats to find out what they thought. None of them has ever seen a ‘mandate letter’ before, but could imagine such a thing, as their replies reproduced below show. Their views about whether such a thing was a good or bad thing are mixed. 

David Skinner, Professor, Communication Studies Program, York University.

This sounds intriguing (and problematic). I have never heard of such a thing before. Perhaps obvious suggestions, but have you asked Liora Salter or Konrad von Finckenstein? It would be interesting to know if there is something here and who/what party “invented” it.

Konrad von Finckenstein, former chair of the CRTC (2007-2012), head of the Competition Bureau (1997-2003), Justice of the Federal Court (2003-2007) and now an independent arbitrator of Canadian and international business disputes.

The letter to Blais was indeed unprecedented. Like you I have no problem with the general contours. Strictly speaking it should have taken the form of a direction to the CRTC like the government did on forbearance for instance. Instead they used the more informal letter carefully saying “should” instead of “shall” thereby leaving some leeway to the Commission to differ with the expectations expressed in the letter as it sees fit to do so.

Frankly, I think the letter is useful. It shows a delineation of the government’ s overall policy and will avoid any unintentional conflict between the Minister and CRTC yet leaves the CRTC open to go a different way, if it feels circumstances warrant, and allows it to spell out in detail, in an preemptory defense, why it took the decision. Personally as chairman I would have preferred such a letter to the sudden criticism that resulted when the CRTC took a decision the government did not agree with.

By the way you might want to file an access to information request to see if a similar letter regarding broadcasting was sent by Minister Glover to the chair.

Jon Festinger, Q.C., media, regulatory and corporate lawyer and a faculty member of the Centre for Digital Media in Vancouver. He also teaches law at the UBC Law School and Thompson Rivers University.

Having practiced regulatory law for much of my career […], I can say that I have never heard of a “mandate letter”. More interesting than my opinion is that of Sheridan Scott former counsel to the Commission and past Commissioner of Competition, heading the Competition Bureau of Canada. Sheridan very recently spoke to my class at UBC Law (Video Game Law) on the intersections of policy, politics & Law. She expressed her opinions and surprise on the subject of procedures being followed by cabinet vis-a-vis the Commission, if memory serves. You can find video of Sheridan’s talk here. Her talk starts at 1:03:44.

Sheridan Scott, co-chair of the competition practice at Bennett Jones LLP and Canada’s Commissioner of Competition from 2004 to 2009 and Chief Regulatory Officer of Bell Canada before that.

I also believe that this sort of letter is unprecedented but my reaction to it is generally positive. I have always been in favour of policy directions rather than Cabinet appeals, since they necessarily speak to general rather than case-specific issues.  While a letter such is this is not the same as a policy direction, and is not subject to the same procedural safeguards, I would nonetheless see it as providing useful context to a regulator that operates at arm’s length but not in a complete vacuum.  I do not think that it in any way forces the CRTC down a specific road:  it instead provides some useful considerations to be aware of in carrying out their statutory mandate. 

In the telecom side this direction is nothing more or less than the Policy Direction issued several years ago, so nothing new.  On the broadcasting side, there is more guidance but the wording is quite general.  Obviously there are many ways for the Commission to provide access to more programming choices and affordable choices and this letter does not prejudge or dictate any of these.  Nor are these unusual goals to identify:  the CRTC itself often indicates that its decisions are aimed at increasing programming choices and affordability.  As far as providing consumer access to broadcasting hearings, this is also something the CRTC has tried to do especially under Konrad’s direction, when benefits monies were diverted for this purpose. 

If there is one thing I find disappointing about the letter, it is the failure of the government to say anything about the importance of Canadian content.  Fostering the development of Canadian content and encouraging its accessibility were clearly amongst the original intentions of the legislators and lie at the heart of the legislation, as the Supreme Court of Canada has recently suggested.  This letter can’t change that and indeed it suggests the Commission should be mindful of the original intent.   

In sum, while this sort of letter is unusual it does not to my mind constrain the CRTC in any material way and provides additional context for the Commission to consider.  In any event, I’m not sure there is much of a remedy if the CRTC fails to take any steps in these directions.  The government can’t issue a policy direction to apply to past policy decisions (though it could issue a direction to influence decisions on a forward looking basis) and on the broadcasting side Cabinet appeals are limited to decisions to issue, amend or renew broadcasting licences only.  The scope of Cabinet appeals is broader on the telecom side, and I think this type of ministerial communication is definitely preferable to tweeting what the Cabinet is likely to do on appeal, before the CRTC has taken a decision, as we have seen in the past.  And in any event, there is already a Policy Direction in place, and the letter does nothing but confirm this.

Anonymous former senior bureaucrat:

I have also heard from several communications law experts. The consensus view is that the letter walks a fine line — likely inappropriate but not illegal. In the so-called “arm’s length” relationship, the length of the arm has never been fixed — but in this interaction it appears to be very short. 

With respect to telecoms, the letter references the Policy Direction which is public and in force, so that’s a wash.

For broadcasting, the letter, combined with the Section 15 Order, is certainly relevant to anyone participating in the CRTC’s consultation on the future of television. Unlike the S.15 Order, the letter cannot in any way be considered binding on the Commission or the Chair. However, the letter gives the appearance of constraining the CRTC’s discretion because, ultimately, the government could intervene by way of a formal policy direction if the CRTC’s outcome were contrary to the views expressed by the Minister. So arguably this is setting policy by stealth — without the government having to take on the responsibility and suffer the onerous public and parliamentary process of issuing a formal policy direction as set out in the Broadcasting Act. In this context, the letter’s release under access to information may be way of managing expectations of interested parties — especially those with a vested interest in the status quo.

When the current Broadcasting Act was being debated in Parliament, the main criticism of the proposed Governor-in-Council power to issue policy directions was precisely this outcome — that the mere existence of the power would so change the relationship between the CRTC and the government of the day that the government would be able to get away with telling the CRTC what it wants without having recourse to the process set out in the Act. This outcome, it was feared, would undermine the independence of the regulator much more significantly than any actual use of the power as set out in law. Since the Act was passed in 1991, this letter is the first documented instance of this criticism and concern having been borne out.  

Clearly, Moore’s letter to Blais raises fundamental issues about the independence of the CRTC. While views differ over the appropriateness of the letter, nobody thinks the ‘mandate letter’ is business as usual. 

One thing that emerges from these responses is the sense that regulators have been blind-sided by already high-levels of intervention in the CRTC’s affairs. This was notably the case when then Industry Minister Tony Clement announced, by all things, a tweet that the CRTC’s Usage-Based Billing decision in 2010 would be overturned if the Commission did not go back to the drawing board on its own accord. Duly warned, von Finckenstein ordered the CRTC staff back to the drawing board; a more palatable wholesale bandwidth access rate followed the next year.   

Rather than continuing to be blind-sided, it’s not surprising that those closest to the fray – von Finckenstein and Scott, notably – think that giving the government even more powers to issue ‘mandate letters’ might offer greater clarity. Indeed, with a mandate letter in hand all might be clear and no one would be sent back to the drawing board by tweets issued in the middle of the night.

That is understandable, but I have my doubts. Anonymous, it appears, who I can assure is no stranger to these matters, is not so sure either.

I worry that grafting more powers on the extensive ones the government already has will only further eliminate whatever independence the Commission still retains.

Regardless of which of these views is correct, one thing is clear: ‘mandate letters’ are not ‘business-as-usual’. Things need to change, but just how remains up for grabs. Until they do, however, the independence so essential to the CRTC’s legitimacy and, the public’s trust in it, will remain on shaky ground, and for good reason.    

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Globalive: InstaAnalysis of Wind Mobile Decision

Globalive’s (Wind) ability to operate and compete in Canada’s cellphone market was given surer footings and wider berth yesterday.  That’s the effect of a Federal Court of Appeal ruling that said that the Government acted properly when it used an “order-in-council’ to allow Globalive to enter the Canadian wireless market even though it was clearly owned and financed by capital from Orascom, an Egyptian company that has since passed into the hand of new owners: VimpelCom, a Russian based outfit.

The decision has not yet been posted on the Federal Court of Appeals website, and even using the mighty Google proved fruitless in turning up the original decision, or perhaps I’m just dumb. Several other sources of varying quality, however, are available: here’s Windmobile’s self-serving cant; an online source that looks useful is TelecomPaper, and the law firm Stikeman Elliot offers a thorough review. After this, there’s the cascade of your run-o-the-mill news sources — CBC, the Star, National Post, and Globe & Mail, in roughly that order — that all seemed to follow the basic line that hit the wires (and here).

So, the fact that the actual decision itself is missing is, umm, a problem. It appears that some people have not quite got that we now live in a ‘show me’ environment, where having the actual decision easily to hand would be nice. We should not have to work so hard to find important things, or rely on hand-me downs in the news and information realm.

In December 2009, the CRTC found that the Egyptian-based Orascom owned and essentially controlled Globalive, mostly because it provided the lion’s share of capital investment standing behind the erstwhile Canadian cellphone company. The CRTC denied Wind Mobile a wireless license, thereby stopping it from entering the market.

The Government overturned the regulator, but then found its own path subverted when communication workers (CEP), Telus and Public Mobile successfully challenged the Government’s ability to skirt the Telecommunications Act’s limits on foreign ownership by way of Cabinet Directive before the Federal Court earlier this year. The Federal Court agreed with them and slapped down the Government for using the power of Cabinet Directives to do an end run around the regulator and existing law, putting Wire Mobile in limbo.

Complicating matters greatly, just before the CRTC denied Wind Mobile’s application for a wireless license, Industry Canada had sold spectrum rights to Globalive, in line with Government policy.  With Industry Canada and the CRTC at odds with one another, something had to give. The CRTC was pushed aside in the end, Wind Mobile can go ahead with its spectrum and wireless markets now more firmly in hand.

Cabinet has broad authority to interpret and reconcile such clashes between different branches of ‘the State’, according to yesterday’s Federal Court of Appeal decision.

That the CRTC decision had made the spectrum rights just given by Industry Canada to Globalive useless, demanded that Cabinet step up with a novel interpretation of telecoms law and policy in Canada. It did, arguing in a novel manner that nobody else seems to have thought of that promoting access to foreign capital is part of promoting competition in the marketplace. I can see the link, but think that interpretation is pretty hard to square with the foreign ownership restrictions in the Telecommunications Act.

Many might not complain too much about promoting competition by loosening the foreign ownership rules, although some would (CEP).  Few, however, would agree that the Telecommunications Act is meant to promote access to foreign capital. A plain reading is that its restrictions are designed to limit foreign ownership and control. And few would suggest that it’s okay for the government to do end runs around the regulator and law to achieve changes to the law that it could not obtain in Parliament.

That’s what the Federal Court said in March. That set of principles, however, was thrown out on appeal yesterday by the Federal Court of Appeal, and everything else that the CRTC and Federal Court had said. The Appeal decision accepted the Government’s position. It gave a blank cheque to Cabinet to rule by fiat rather than the Telecommunications Act. And it broadened Windmobile’s scope for action and the security of its spectrum and market access rights.

The decision may delay the introduction of more competition, however, because the ground rules remain murky and the existing foreign ownership rules in the Telecommunications Act intact. The Government may find good reason to move even slower on reforming the law because there is no longer a specific case to prod its hesitant hand.

This state of affairs will serve Wind Mobile and almost all of the other incumbents reasonably well. However, Public Mobile intends to appeal the case to the Supreme Court.

The Communication Energy and Paperworkers will likely join it. As the banner hanging from CEP Headquarters in Ottawa proudly declares, “it’s your’s, own it”, by which they mean telecoms, culture, broadcasting, lumber, energy plants, etc. “The need to maintain Canadian-control of telecom and broadcasting is more critical than ever”, Peter Murdoch, CEP’s VP media, states.  I am not so sure. Is that really true?

I do agree with CEP and PM (Public Mobile), though, that opposing giving Cabinet the authority to do end-runs around regulators and laws, to rule from the top rather than the messy processes of ‘regulation from below’, is a bad thing.

One thing that CEP might take cold solace in is that foreign ownership ain’t gonna happen just because Harper et. al. and the Federal Court of Appeal have opened the Pearly Gates to Canada’s telecom market — big as it is, ranking around eighth or so, depending on whose doing the counting.  But make no doubt about it, that we’ll need rules . . . . , and even then it is not certain how much capital will come.

When the rule of law and regulators clashed with policy and politics yesterday, it was the former that crumbled. Of course, Globalive, and its ultimate owners and investors, Vimpelcom, are the immediate beneficiaries of this court decision. So, too, are customers, a point made with no time wasted by Windmobile Chairman Anthony Anthony Lacavera, and figure-head for the concept that, regardless of where the money comes from, it is Canadians like him and other Directors on Windmobile’s board that are in control.

As Lacavera exclaimed, “we and our 300,000 customers are thrilled with this decision.” Well, maybe not thrilled . . . . . but you know what, he’s not entirely off the mark.

Just yesterday, another OECD report placed Canadian wireless users at the bottom of the international heap for outrageous international roaming charges, 25 bucks/MB for Canadians versus less than $5 for people in Greece and just under $10 for OECD countries on average. The full report can be found here.

Lacavera’s other comments were little more than self-serving cant: “Now we can continue . . . without the distraction and expense of challenges by our competitors to our right to operate.” Ya, sure, whatever.

I do not like it when politics and policy trump law and regulation in a heavy handed way. There’s lots of room to finesse this, but for now I can say that I do not thing that rule by Order in Council is a good way to make policy. It politicizes it. In fact, there seems to be a penchant for this in Canada when it comes to telecom, media and the Internet, as I have shown in a previous post. You can see for yourself by looking at the Privy Council Office’s Order-in-Council database.

The penchant for rule by Cabinet Directive has been ramped since the Chretien Liberals in the mid-1990s and has not abated since. Canadian levels of intrusiveness appear to be high by my estimation points to a certain backwardness in Canada that allows relationships between telecom-media-Internet titans, regulators and the ruling Government of the day to be too close. That’s code, in other words, for the cozy relationship between politics and telecom-media-Internet companies in Canada is a bad thing, anti-democratic and at odds with the ideals a free and open network media system.

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

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

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

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

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

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

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

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

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

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

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

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

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

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