Posts Tagged ‘telecommunications history’

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.

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