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.
Canadians are all a tizzy about what the Harper majority might mean across a whole range of things. There’s a panopoly of issues within the communication and media realm that might be up for quick action: foreign ownership rules, the re-tabling of copyright legislation, the potential regulation of Online Video Providers (OVPs), and the possibility to turn back the tide that his now transforming the Internet in Canada into a pay-per model governed by the incumbent’s ‘business models’, bandwidth caps and UBB.
For now, I want to focus on the first issue: the telecoms foreign ownership rules and the potential that any changes taken in that regard might be harnessed to a bigger project, namely turning Canada in a digital, ‘free media haven’ governed by the highest standards of the networked free press possible (see here and here, as well).
A version of what follows was published in my column for the online version of the Globe & Mail today, so here I will expand on a few of the issues and add a few links, as I usually do.
The Conservatives are well-known for wanting to liberalize the current rules. Academics and consultants such as Michael Geist and Mark Goldberg have also called for greater foreign investment in Canadian telecoms. Most banking analysts feel the same way.
Konrad von Finckenstein, CRTC chief, is also in favour, but frets about how to deal with the slew of integrated telecom-media behemoths that he has recently blessed: Bell Media, Roger Media, Quebecor, Cogeco, Shaw, (but not Telus). In other words, how to open the gates for more foreign investment in telecoms but not broadcasting?
Those in favour of changing the existing rules believe that doing so could usher in more investment in network development, more competition, less bandwidth throttling and far greater consumer choice. The current incumbents who dominate the telecoms, media and Internet markets in Canada would, so many appear to believe, be forced to compete head-on with the big global players – AT&T, France Telecom, T-Mobile, Japan’s NTT, China Telecom – for customers.
The goals are laudable, but are they realistic?
Some suggest that movement on the issue will be slow because the Tories do not have a clear strategy to deal with it. Yet, the Government has had several options on the table since 2006:
- 1. removing all foreign investment limits;
- 2. raising the limits from the current twenty percent to just under half;
- 3. permitting foreign investment only in new companies that have less than 10 percent market share.
The only strategy the Government doesn’t have is keeping the status quo. Expect change soon.
The Government’s Cabinet Directive in 2006 instructing the CRTC to rely on market forces to the maximum extent feasible also tips its hand. Indeed, the Government tried to do an end run around the law through another Cabinet Directive overturning the CRTC’s decision to reject Globalive’s (Wind Mobile) bid to become a new wireless player on the grounds that it was not Canadian owned and controlled, as the Telecommunications Act (sec. 16) demands.
A Federal Court in February stopped that effort in its tracks. At least a formal change to the Telecommunications Act’s foreign ownership rules would have the virtue of bringing the law into conformity with the facts on the ground, i.e. Wind Mobile is up and running.
Even if we assume that allowing greater foreign ownership is a good thing, and I will offer a few more reasons below as to why it could be, many pesky issues remain. For example, what if the Government decides to just go with option #1: Allowing greater access to foreign capital markets for new comers?
The intended beneficiaries, of course, are Wind Mobile, Mobilicity and Public Mobile, but would it also apply to Quebecor, a company that is a newcomer to wireless but well-entrenched across the rest of the media? Somehow that doesn’t seem right.
That raises the larger issue about how to disentangle telecoms from broadcasting? The fact that telecoms and broadcasting are becoming more intertwined is becoming clearer by the day as Netflix gains a stronger footing in Canada and as Google and Apple appear routinely before the CRTC and Parliamentary Standing Committee on Canadian Heritage.
Indeed, when the Americans negotiated the NAFTA and WTO deals they anticipated that digitization would soon dissolve the boundaries between telecoms and broadcasting and bring the ‘cultural industries’ within the reach of the ‘global trade regime’ as a result of ‘technological forces’. MIT scholar Ithiel de Sola Pool argued much the same thing in his 1983 classic, Technologies of Freedom, many years earlier.
Yet we also need to ask if loosening the rules will lead to the outcomes that so many expect? AOL, AT&T and PSiNet were important players in telecoms and the Internet in this country during the dot.com era, but where are they now?
They have long since retreated, collapsed or gone bankrupt. The point being that this is not the rah-rah days of globalization in the late 1990s, but one when foreign investment in telecoms is at a low ebb.
Just as the “old” AT&T was retreating from Canada, it was also selling off a slew of networks across Latin America in the mid-2000s – mostly to Mexico-based TelMex. The trend continues.
Just last month, Deutsche Telekom sold its T-Mobile wireless operator in the U.S. to the resurrected ‘new’ AT&T. Pundits can believe all they want that AT&T, France Telecoms, Deutsche Telekom, NTT, and so on are lining up to enter Canada, but evidence suggests otherwise.
The lesson from T-Mobile is that foreign capital investment is hunkering down rather than trying to conquer the world. As two World Investment Reports from UNCTAD in 2008 and 2010 observe foreign investment and cross-border mergers & acquisitions in telecoms have fallen considerably from their late-1990s peak throughout the decade, and have yet to recover, especially after the ‘crisis of 2008’.
The sale of T-Mobile also reveals that even the massive U.S. wireless market is unable to sustain robust competition. Three players dominate the U.S. wireless market: AT&T, Verizon and a smaller Sprint/Nextel.
In other words, foreign ownership is no sure-shot solution for concentrated telecom, media and Internet markets. In fact, the World Bank’s message since the early 1990s, amongst others, is that foreign capital investment in telecoms only delivers the good when it is properly regulated and used to launch new rivals, rather than to acquire incumbents (i.e. ‘greenfield investment’).
None of this is to say that we should avoid more foreign investment in telecoms. In fact, the history of telecoms in Canada has been bound up with foreign capital since the first telegraph lines linked Toronto to Buffalo and New York in 1846 and the trans-Atlantic cables created a vast Euro-American space of capital, markets, migration and information with Canada at the hub in the 1860s and 1870s.
Today, greater foreign investment could not only be used to increase the availability and use of broadband telecom and Internet services and foster more competition, but as a stepping stone to far-reaching efforts to transform Canada into an open ‘digital media haven’.
New rules would provide an incentive for greater foreign investment, while our cool climate could entice Amazon, Google, Rackspace, Microsoft and others to build their massive ‘data warehouses’ on Canadian soil because it is cheaper to run these energy hungry facilities here than in the United States. Our stronger protections for personal information could put vast stores of data beyond the reach of the U.S. Patriot Act and keep the ‘domain name snatching’ operations of Homeland Security at bay.
Birgitta Jonsdottir, the Icelandic Member of Parliament, has similarly proposed to make her country a haven for “digital free speech” – similar to what the Cayman Islands is for banking, but with the higher purpose of advancing human rights, democracy and freedom of expression. Seen from this angle, relaxing foreign ownership rules in Canada could serve as the cornerstone of efforts to foster an open telecom, media and Internet system governed by the highest standards of a networked free press in the world (also see here).
For that to happen, however, the new majority Harper Government will have to embrace openness, freedom of speech and democracy just as firmly as it now has its hands on the levers of the state.
The WayBackMachine is a colossal public digital archive of the Internet backed by the massive resources of the Smithsonian and the Library of Congress in Washington. There is nothing even close to it Canada and that is a problem because it means the many of our public records from the online world no longer reside in this country.
And so it is, for instance, that the oldest known digital copy of the CRTC’s website – dating from May 1, 1997 — can only be obtained from the WayBackMachine. Not only is this an important document because it is the earliest record of the agency’s activities online, but also because the ‘snapshot’ of the website taken on that day reveals a bold statement of principles that were supposed to guide all of the CRTC’s activities: “Communication in the Public Interest” – as had been the case for more than twenty years before that.
The last known digital record of this statement is from December 20th, 2008. A visitor to the website on that day would have still seen the words “Communication in the Public Interest” right at the top of the page.
Moreover, the fact that the phrase had risen from the bottom of the page to the top over the years might have suggested that the public interest had become even more important as time passed in light of the momentous changes that have been sweeping the media and Internet. Indeed, no matter what it did, the CRTC’s decisions would shape these developments for decades to come, and so it was wise to have a sturdy set of values close to hand as it navigated the turbulent waters ahead.
Such wishful thinking, however, would have been mistaken. Indeed, while many Canadians were celebrating holidays and ringing in the New Year, sometime between December 20th, 2008 and January 21st, 2009 when the WayBackMachine took its next snapshot of the CRTC’s website, the “public interest” had vanished. Forever.
Ever since, the CRTC has recast itself in a decidedly different mold, as its new ‘mission statement’ asserts:
“An Independent Public Authority in charge of regulating and supervising Canadian broadcasting and telecommunications”.
“Authority”, “supervising”, “regulating” – these are not words that reflect a democratic frame of mind that aims to inspire public participation in the processes that will shape the digital media landscape of the 21st Century. Instead, they are a brusque assertion of authority and part of the linguistic fortress put into place by a ‘muscular state’ under the Harper Government that seems designed more to keep the public at bay rather than to deepen its involvement in such affairs.
It is also a language that conceals major issues and values behind a thicket of techno-bureaucratic mumbo jumbo: User Based Billing, Internet Traffic Management Practices, Bandwidth Caps, etc. These are not words that aim to inspire people, but to make their eyes glaze over and to turn away. It is a language that only lawyers and lobbyists can love.
Remarkably, no record at all of this change from the “public interest” to “public authority” standard of regulation exists in Canada, either from the CRTC’s own website or other Government websites. Library and Archives Canada maintains some records for all Government websites, but its records of the CRTC’s digital online footprint are pitiful, covering two years from 2006 until 2007.
This extremely limited coverage not only applies to the CRTC, but appears to be the standard practice adopted for all Government websites in Canada. It is an incredibly weak standard in comparison to those in the U.S. and Britain, for example, where snapshots of all domains (not just government sites) of the “national Internet space” are routinely added to the national digital archives and extend much further back in time.
It is a sad indictment of the Harper Government that we, as a country, have to rely on the WayBackMachine to cobble together the bits and pieces that make up public memory as well as the evidence needed to illustrate the change from the public interest to the “public authority” model of regulation that has taken place. Indeed, it is an irony of the highest order that the effort to scrub the CRTC’s historical record of its past commitments to the “public interest” can only be discovered on a website stored and run out of Washington.
If there was ever a way to kill off the notion of “the public”, this is it. We must ask, why has the “public interest” been thrown under the bus on the Harper Government’s watch? And why should we rely on digital archives set up and operated at public expense out of Washington to fill in the gaps left by our own public institutions – the Government and the CRTC – who have failed entirely to maintain a comprehensive, digitized public historical record of our own?
The WayBackMachine and other, publicly-supported, user-driven social media projects like it usefully create, store gather, organize and disseminate a wealth of ideas, memories, records, and knowledge. Some such sites, such as Wikipedia, are stunningly successful, consistently ranking among the top ten websites in the world — except in authoritarian countries such as China and Iran.
As records are scrubbed and left to vanish, we need the WayBackMachine and others of its kind more than ever. Nonetheless, such efforts are no substitute for an official digital record of where we have been in Canada, where we are going, or of the silent switch that has taken place between the principles of the past and the lost souls who govern in this country today.
Democratic societies demand nothing less than regulators – and a government, first and foremost — who are steered by an informed appreciation of who the public is and what they want. We also need a clear digital record of that commitment.
Not being the quickest guy with numbers, I often wonder just how much of what we can do on the Internet before hitting the Rogers ‘Bandwith Cap” wall that comes with my service? Using Rogers high-speed express service, I get 60GB per month, after which I will have to fork out $2 per GB.
I mean, first of all, just having to even think about this, let alone having to calculate it is a pain in the neck. The Globe and Mail had a good break-down the other day of how much bandwidth is involved in downloading email, music files, tv programs and movies. Here’s its graphic.
So, I could send 4 million emails or download 8,570 songs, 37.5 television shows (hd) and 19 movies (hd). Even if I’m a mad, crazy emailer or music downloader, I’d unlikely hit the limit. But, then again, what if I had a mass distribution list for the eco-feminist news letter I send out to 2,000 people every month, or to my red meat eaters club?
What if I play World of Warcraft? If you think I’m being funny, well, I am trying. But take a look at Teresa Murphy’s letter to the CRTC outlining how Rogers throttles World of Warcraft players. The problem is that restrictions and limits on how we use the Internet are popping up all over the place and for everyone, not just the villified ‘bandwidth hogs’.
The limits are also impinging on how Netflix operates in Canada as well. On March 28 2011, Netflix set the default quality of its video streaming service in Canada to low to help people conserve bandwidth.
In other words, Netflix has deliberately degraded it services relative to what it offers in the U.S. in response to the restrictive conditions imposed by the ‘big six ISPs’ in this country: Bell, Telus, Shaw, Rogers, Quebecor and Cogeco. Users do, however, have a choice and can still select from three settings:
- “Good” – The default setting with good picture quality and lowest data use per hour (about 0.3 GBytes/hour)
- “Better” – Better picture quality and medium data use per hour (about 0.7 GBytes/hour)
- “Best” – Best picture quality and highest date use per hour (generally about 1.0 GBytes/hour – or up to 2.3 GBytes/hour when streaming HD content)
Tying up the Internet and its users in a thicket of technical and economic restrictions, however, could come back to bite the big 6 in the ass. For that too happen, however, we probably shouldn’t look to the CRTC or to the Harper Government.
The CRTC has already brazenly said that the review sparked by the furor over its January 25, 2011 UBB decision will be narrowly focused on that decision alone. In doing so, it ruled out a critical public examination of the ‘long march’ to the pay-per, provider controlled Internet model in Canada.
Industry Minister Tony Clement is a little more ambivalent on the matter. He offered no rebuke to the CRTC for stubbornly sticking to its myopic focus. He did, however, rebuke Bell’s attempt to replace its wholesale UBB with a new Aggregate Volume Pricing Model.
There are two more interesting areas that hold better prospects of turning this wreck of a digital media policy around, and both lead straight not to the consumer Internet market but rather to the capital investment market.
In a study by the New York branch of the investment bank, Credit Suisse, the author stated that the added cost of using over-the-top video services such as Netflix, AppleTV, etc. due to ‘excess usage charges’ (but which the “big six” exempt their own video/tv services from) could result in people cutting back on their cable and satellite bills. They could do that either by subscribing to a cheaper tier of channels, or dumping cable and satellite TV altogether.
The latter is improbable, at least in any great number, anytime soon. The idea of cutting back to a cheaper tier of cable channels while cobbling together a range of over-the-top services such as Netflix, Boxee, etc., however, may have more legs. That scares the investment bankers because cheaper tiers mean lower ARPUs (average revenue per user), in the lingo, and that is one of the holy grails for figuring out how much companies are worth on the stock market, i.e. their market capitalization.
The UBB uproar has also spawned fears in the capital investment markets in Canada that Bell, for one, is taking seriously. Thus, during a Conference Call on February 10 2011 with Canada’s leading investment bankers, Jeff Fan of Scotia Capital posed the following question to George Cope, BCE’s CEO:
Yes, good morning. Thanks very much. I want to ask you guys about the broadband situation that’s going on. A lot of investors are obviously quite concerned about what’s going on on the regulatory front with usage-based billing so perhaps can you give us a sense of what . . . the impact of this could be should the government move forward on a more Draconian basis? (emphasis added, see page 12)
Fan was not alone in raising the issue. And Cope went on and on to assuage any concerns. But look again at the last line in Fan’s quote that brands any attempt by regulators to roll back the pay-per Internet model juggernaut would be “Draconian”. Clearly, investment bankers are not on the side of the ‘good and the just’, but their fears reveal cracks in the walls that may play well into the hands of those who do want to turn back the tide.
These are important things to bear in mind as the politics of the Internet unfold. I’ve said in the past that the CRTC is constrained by a heavy-handed and interventionist Harper Government. It is also constrained, apparently, by perceptions on Bay Street. It is also limited by its own timidity.
Nonetheless, there is scope for maneouvre in all this. So long as World of Warcraft players and Internet users of the world unite there may yet be opportunity to stem the tide. A quick search of the Internet shows that others around the world wish Canadians well in their battle against a model that they hope never sees the light of day in their own countries (or more correctly, hope that it never becomes the norm, as it is in Canada, as Professor Geist’s recent study shows).
Last week I asked a few contacts at the CRTC if they could get me invited to the Industry-Regulator Conflab this coming Thursday (March 24). You know, the behind-closed door, by-invitation-only meeting organized by the CRTC to talk with the industry about how it should deal with evolving media markets and the major players with a stake in the game. The digital media universe is all topsy turvy and the regulator’s on a search for what to do.
Sounds interesting. I know some people, experts, are coming in from NY to talk to the hand-picked few allowed to attend. Luckily, OpenMedia.ca was able to wrangle an invite too. Certain officials, notably Industry Minister Clement, appear to be being particularly solicitous towards the organization as of late, with their 500,000 ‘stop the meter’ petition opening the Minister’s eyes — even if opportunistically and for the briefest of moments.
For me, no such lucks. Can’t go, no room said my contacts.
The industry folk will be there too, mostly from the telecoms and broadcasting sectors, but there’ll no doubt be some ‘new kids’ on the block there, too: Neflix, the Google guys, Apple TV. They’ve been playing a more significant role in telecom and media affairs lately (See, for example, interventions by Google and Apple TV). They’ve been picking off a few regulatory bodies, too, for their own team. The CRTC is also juicing its own ranks with a few people pilfered from private consultancies.
I’ll speak more on this in a day or two, preferably before the meeting itself is held. But here’s a copy of the ‘invitational document’ sent by the CRTC to participants. CRTCRegForum_2011
The point that I want to close with now, however, is that up until 1976 in Canada, the primary criteria for inclusion in a regulatory proceeding was that one had to have a business or economic stake in the game. That criteria, however, was thrown out as an affront to democracy and the public interest, just like it was ten years earlier in the United States. Today it is back.
Last week the CRTC made it clear that on key issues such as Usage Based Billing, it is not willing to open up the long path that got us to bandwidth caps and the pay-per Internet model. Nope, it’ll be a narrow review of the January 25th UBB decision. Note, too, the conspicuous silence of Tony Clement on this issue. After grandstanding during the initial swell of outrage and throwing a few bones to the crowd and burnishing some egos, he’s gone silent. After all, letting the market rip leads to just such an outcome.
This Thursday’s conflab will not change the current direction of events. That is unfortunate.
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.
Over the course of the last fifteen years, the Internet Access market has grown into a $6.5 billion dollar industry. That is roughly the same size as the cable and satellite television distribution industry.
There are nearly 500 ISPs in Canada, but according to the CRTC’s own annual Communications Monitoring Reportfor each of the last few years, about 95% of Internet subscribers obtain service from one of two players: the ‘old’ phone company or their traditional cable provider. The ‘big six players’, according the CRTC’s own data, account for about three quarters of the market.
My own data collected as part of the International Media Concentration Research Project shows that the Internet access market is not quite as concentrated as the CRTC suggests, but still high, with just over two-thirds of Internet access revenues going to the ‘big six’: Bell, Telus, Shaw, Rogers, Quebecor and Cogeco. Some jockeying in terms of market share does, of course, occur between the major players, but levels of concentration over time have stayed remarkably flat. The upshot is that a small number of dominant players compete in tightly oligopolistic markets (see below for evidence).
Small and independent ISPs, online video providers (Netflix) and others, however, have consistently claimed since the rising popularity of the Internet in the mid-1990s that the big players have used their dominant market power to hobble competition. The CRTC, despite its own analysis, however, has been reluctant to deal with the problem of media concentration head-on. Government directives to rely on “market forces to the maximum extent” further disarms the regulator. The Government’s injunction that the CRTC must also take heed of the incumbents’ plans to invest in new networks and content services all but turns the agency into a toothless laptog unable to effectively regulate.
In contrast, when faced with similar obstructions to competition and the development of an open, broadband network in Australia by the dominant telecoms provider, Telstra, the government there created the National Broadband Network Company in 2009. The aim is to bring a ‘next generation’ ultra fast fibre-to-the-home Internet capable to 93 percent of Australian homes. The network will deliver speeds of between 100Mbps and 1 Gbps and the plan is to offer several different tiers of service, priced between $30 and $130 (Cdn). Total cost: $35.7 billion. Initial service began in a small number of homes in 2010.
Australia is not alone. A dozen-and-a-half governments, including Korea, France, the UK, the US, etc. – have committed to spending roughly $71 billion on similar initiatives over the next few years (Benkler report, pp. 162-164). Some of these projects are state-centric, others are not. In many countries, from Romania to the Netherlands, municipal and even neighbourhood-based broadband Internet development projects are underway. Despite the opposition within industry in North America, these efforts are considered to have been a huge boon to developing and improving affordable access to open-broadband Internet for residential subscribers, community centres, and businesses alike. Some of these are commercial ventures, others are joint public-private initiatives, and yet others involve incumbent players.
In 2005, the UK also adopted an approach that has been called for in Canada for years: ‘structural separation’. At this time, the regulator, Ofcom, required British Telecom, the dominant provider, to break itself into two parts: one for wholesale, and one for retail. BT did so the following year. BT can operate in both the “network” and “services” areas, but its wholesale operations cannot discriminate between the company’s own Internet services and anyone elses.
The ‘open reach’ model now in place in the UK requires maximum access to BT’s facilities in addition to the separation of its wholesale (network) and retail (content, Internet and services). This includes “improved access to the engineering . . . books used by BT to enable Communications Providers to provide their End-User customers with . . . better and faster” service (para 3.5). This a strong, pro-competitive, pro-innovation, pro-user and pro-open media arrangement.
The ‘big six’ in Canada, of course, chafe at ideas of ‘alternative carriers’, ‘structural separation’ and a maximalist approach to open networks. They also scoff at any claims that telecoms, media and Internet markets in Canada are concentrated, arguing instead that they are fiercely competitive. Indeed, Bell and Shaw emphasized just this point the other day in their testimony to the Standing Committee on Industry, Science and Technology (listen around the 1hr, 50min point).
Whether or not the telecoms, media and Internet industries have become more or less concentrated is, of course, a debatable issue. It one made all the more difficult by the fact that there has not been a consistent body of evidence to help inform the debate either. As a result, fiery debates have taken place in a vacuum, with positions closely tracking ideology rather than evidence.
As I indicated above, the CRTC’s own evidence tends to corroborate the view that media concentration does exist in many sectors. The problem with its evidence, though, is that its manner of presentation is inconsistent over time, focuses only on the top 4 or 5 players, and based on underlying data that it refuses to disclose. In the past year, I have filed a dozen Access to Information Policy (ATIPS) to gain access to this data, but have been refused each step of the way, and further denied on appeal.
I’ve done this as the lead Canadian participant on the International Media Concentration Project, which is led by Eli Noam, a well-known Professor of economics and finance, as well as a media and telecoms expert, at Columbia University (NY). The project has no axes to grind and includes 40 researchers from around the world who are systematically collecting data on concentration trends for every significant telecom, media and Internet industry since 1984: ISPs, search engines, newspapers, cable and satellite tv distribution, wired and wireless telecoms, film, conventional and specialty tv channels, and so on.
Here are the figures that I have done so far: CANADA Internet Services Provider DRAFT(1), CANADA Video Distribution TV DRAFT(1), CANADA Wired Telecoms DRAFT(1), CANADA Wireless Telecom DRAFT(1), Canada Total Television Universe, Canada Search Engines, Canadian Radio Mrkt Share, 1984-2009, and Canada Newspapers. The figure below shows the trends for all sectors over time:
Please feel free to use, criticize, suggest additions, or revisions to, etc. but when you do use it, cite it as follows: D. Winseck (2011). Media Ownership and Concentration in Canada. The International Media Concentration Research Project, Columbia University, New York.
So, what does the evidence show? Several things stand out. First, each sector of the media is concentrated by standard measures (e.g. CR and HHI scores). Second, that patterns generally follow a U-shape, with concentration falling in the 1980s, rising sharply from the mid-1990s, and staying relatively flat since then. Concentration levels in Canada are high by global standards, in fact about two and a half times higher than the US (see Noam’s 2009, Media Ownership and Concentration in America, Oxford University Press, 2009).
The telecoms, media and Internet policy and regulatory frameworks in Canada have encouraged these trends for several reasons. First, on the grounds that with so many media outlets available, there’s no need to worry about concentration in terms of who owns those outlets. Fragmentation, not concentration, is the defining feature of the Internet and our times, so the argument goes.
To my mind, however, fewer owners holding more outlets is an important development that needs to be curbed rather than encouraged. Some limits were adopted in 2008 by the CRTC. This was an advance insofar that it was better than no formal rules at all. However, by using the same standards as the ones used to regulate the banking industry in Canada, grandfathering existing circumstances, permiting Shaw to take over the remnants of the bankrupt Canwest at firesale prices, and allowing the already weak rules to be breeched whenever expedient (i.e. Cogeco’s acquisition of Shaw/Corus radio stations in Quebec), the CRTC’s media ownership and concentration rules are toothless.
Second, there has been too much deference to claims that the ‘traditional media’ are being decimated by the ‘new media’. Claims that the ‘traditional media’ are ‘in crisis’ are generally false (see here and here). In fact, ‘old media’ markets like television have not shrunk, but grown. New media have opened up vast new markets for ‘old’ and ‘upstart’ players alike.
That this has been a boon to well-established interests, a case that is most obvious with respect to Internet Access. The vast majority (95%) of this enormous new source of revenue ($6.5 billion) has gone straight to the bottom line of the incumbents telephone and cable companies. Yet, this new source of revenue has occurred with no corresponding upswing in investment in networks and services by the ‘big six’, as I showed in one of my posts a few days ago.
Third, underpinning consolidation in Canada is the myth that in the global scheme of things, we possess a small media market. It is then argued that this condition requires the cultivation and protection of well-heeled players with deep pockets to invest in infrastructure, Cancon and cultural survival. It is an easy story. It makes sense, or so it seems.
However, the ‘network media industries’ in Canada are not small by global standards. In fact, we have the eighth largest network media economy in the world, based on PriceWaterhouseCooper’s Global Media and Entertainment Outlook. Here’s a snapshot of the ten largest media economies in the world between 1998 and 2010: 10 Largest National Network Media Economies.
The combination of these myths, misguided policies and missing evidence is that we now have one of the most concentrated telecom, media and Internet markets in the world. The result has been the creation of a handful of media conglomerates with a reach across the media landscape and a decisive influence over the future of the Internet: Bell (CTV), Rogers (CityTV), Shaw (Global), Quebecor (TVA), Telus, and Cogeco (Radio) are the “big six”.
If ‘the medium is the message’, as Marshall McLuhan once stated, than the dominant players’ ability to shape the speed, capacity, price and technical and economic characteristics of the Internet give them considerable influence over creativity, innovation, experience, and expression. Tinkering with the medium — speed, bandwidth, memory/storage, capabilities — alters the meaning of our experience, and the message of the Internet.
The CRTC, however, refuses to see things this way. Instead, it relies on an exceptionally narrow conception of editorial influence over content. In fact, it has seemed bent on severing far-reaching and principled debates over Net Neutrality”, “Open Networks”, “Open Media”, etc. by using the sterile language of “Internet Traffic Management Practices”. It is a foul, unmoving language for digital gearheads. Reading the CRTC’s many documents on these issues is more likely to make your eyes glaze over rather than make you perk up and want to pay attention. The choices being made. nonetheless, will shape the future of the Internet for decades ahead.
In this constrained view of the world, the CRTC has fully-endorsed the use of economic measures like Bandwidth Caps and UBB to “discipline” what it and the industry vilifies as bandwidth hogs. It registers a vague preference for network investment to deal with congestion issues, but insists on nothing concrete to ensure that this hierarchy of priorities will translate into real world practices. Technical measures to throttle and block Internet applications are also given the green light, but supposedly only as a last resort. The fact that the use of such practices is left up to the discretion of the ISPs and for Internet subscribers to discover and challenge on their own, however, makes one wonder if these so-called ‘technical ITMPS’ actually sit as low down the totem pole as the CRTC suggests. This is regulation by machine and by impenetrable technocratic language.
All of these things add up to something that looks much more like an “Investment and Business Model Protection Plan” for the telephone and cable companies than a set of policies designed to further develop an open, broadband Internet in Canada. Indeed, it is not just the subtle ways in which tinkering with speed, capabilities, price and traffic that ever so slowly alter the Internet, but rather several instances whereby control over the medium as been translated into direct efforts to control the content flowing over it.
The CBC found this out in 2008 when its attempt to use BitTorrent to distribute an episode of Canada’s Next Great Prime Minister was thwarted by Bell’s network management practices. The ‘big six’ have also been at the forefront of efforts to throw regulatory hurdles in the way of alternative OVDs (online video distributors) trying to enter Canada, such as Apple, Google, Netflix, etc. Indeed, they have called for these entities to be regulated just like the old broadcasters. As Netflix explains, it has had a difficult time in the US, but in Canada matters have been worse. Bandwidth Caps and UBB serve this end too by making it more expensive to download television, film and music from them. The effect is once again to preserve the big six media conglomerates’ main business.
Such practices have become even stronger since these companies began offering their own broadband video portals since 2009. In my reading, the rules governing bandwidth caps and UBB allow the incumbents to exclude their own video services from these constraints. A straight-forward reading of the Telecoms Act (sec. 27) would suggest that doing this would violate the ‘non-discrimination’ and ‘undue preference’ clauses, although that is not the view that has prevailed so far.
In a stunning moment of frankness the other day, Bell’s chief of regulatory affairs, Mirko Bibic, told the House of Commons committee meeting that the company’s own IPTV service would not be covered by the UBB and bandwidth caps (listen around the 2hr, 7min. mark). He offered a bunch of convoluted reasons why IPTV is misnamed and that, even though it rides on the same wires that the Internet and telephone do, it is ‘cable’ tv, not Internet TV. How convenient. While Bell and the cable guys throw obstacles in the path of others, their own services get a free ride.