Deconstructing the CRTC

Is it time for Canada to consider restructuring the CRTC? Eleven years ago, the Telecom Policy Review Panel was already proposing “some major changes to the structure and operations of Canada’s policy-making and regulatory institutions.” The intent was “to ensure that Canada’s regulatory framework is more responsive to the challenges of the more dynamic telecommunications sector — now and in the future.”

Is it time to revisit and update the Panel’s report?

Last week’s report from the Montreal Economic Institute (MEI) echoed a theme I have raised before, stating “the CRTC too often merely pays lip service to the principles of the Policy Direction, and has largely gone back to its old interventionist ways.”

Recall that the Policy Direction requires that

1. In exercising its powers and performing its duties under the Telecommunications Act,
   1. the Commission should
      1. rely on market forces to the maximum extent feasible as the means of achieving the telecommunications policy objectives, and
      2. when relying on regulation, use measures that are efficient and proportionate to their purpose and that interfere with the operation of competitive market forces to the minimum extent necessary to meet the policy objectives;

When relying on regulation, has the CRTC used “measures that are efficient and proportionate to their purpose” and that “interfere with the operation of competitive market forces to the minimum extent necessary”?

Jeff Eisenach wrote a piece last week called “Deconstructing the FCC,” describing how the new Chair of the FCC, Ajit Pai, has “delivered on his promise to take a ‘weed whacker’ to the regulatory underbrush, while strengthening protections against waste, fraud and abuse [and] acting to repeal costly paperwork requirements.” His article describes how the FCC had become increasingly politicized, challenging the independence of the agency, as exemplified by the unprecedented White House intervention, mandating a ‘Title II’ utility designation for internet access providers in order to regulate net neutrality.

The decision had nothing to do with the law or the facts, and certainly nothing to do with economics — the commission’s chief economist later stated that the Open Internet proceeding had been an ‘economics free zone.’ Rather, as Chairman Pai said in his speech, “it was about politics … a transparent attempt to compromise the agency’s independence. And it worked.”

Canada has seen similar political interference, with the CRTC receiving instructions from Cabinet and Parliament, sometimes transmitted publicly using Twitter. As a result, the CRTC has issued a number of decisions over the past five years that have a questionable basis in economics. Among other issues, the current CRTC will be remembered as having restricted retail business models and pricing flexibility of retail mobile, TV and internet service providers, services that have all been determined to be sufficiently competitive to merit pricing forbearance.

In the US, as Jeff Eisenach writes, “there have long been discussions on Capitol Hill about whether deregulation would eliminate the need for a stand-alone communications regulatory agency. Quoting a speech by Republican FCC Commissioner Michael O’Rielly at the NAB Show, Eisenach writes “The FCC’s perceived independence, he said, was ‘a large argument’ for keeping it, but ‘to the extent that independence no longer exists, I can see great interest in revisiting this entire issue.’ Eisenach writes “The deregulatory reforms underway at the FCC are important in and of themselves. But they are also, potentially, something more: the first steps on the road to deconstruction.”

Today, Canada and the US present a stark contrast in approaches to communications regulation. The CRTC’s return to what MEI called “its old interventionist ways” seems out of step with the “regulatory humility” guiding FCC Chair Ajit Pai. Reflecting on his first 100 days as chair of the FCC, Ajit Pai said “we’re reviewing the FCC’s rules across the board and deciding which ones still make sense in the digital age. As part of this review, we’re asking whether the costs of a rule outweigh the benefits. When the facts warrant, we won’t hesitate to revise overly burdensome rules or repeal them altogether. And you don’t need a weatherman to know that the wind is blowing certain FCC rules toward modification or elimination.”

By way of contrast, just two weeks ago, the CRTC has asked carriers to seek advance Commission approval of innovative pricing plans for internet services.

As I asked last week, how will Canadians know if the CRTC got it right with its approach?

How will we measure success?

Every so often, I like to take a fresh look at the 2006 report by the Telecom Policy Review Panel. As I have often complained, we are long overdue for an updated review (recommended in 2006 to be held every 5 years).

In Chapter 4, there was a recommendation to establish a Telecommunications Competition Tribunal (TCT).

The CRTC’s long history of economic regulation based on the jurisprudence of public utility and common carrier regulation makes it hard for the CRTC to make the shift away from a presumption of regulation to an approach more oriented toward competition law.

Many of the concerns expressed by the panel in 2006 seem to ring true today: “Its approach has been to engage in a ‘balancing of interests,’ rather than an economic analysis of market power. This results in a tendency to micro-manage competitive market behaviour in order to influence competitive outcomes, rather than to seek less intrusive remedies.”

The TCT would have both investigative and adjudicative functions. As a result, the process of considering complaints should be considerably expedited compared with the two-stage process followed by the Competition Bureau and the Competition Tribunal.
…
The role of the TCT should therefore be reviewed as part of the more complete review of the telecommunications policy and regulatory framework in five years, which the Panel has recommended

The original Telecom Policy Review Panel was created by Liberal Industry Minister David Emerson, although its report was delivered to Conservative Industry Minister Maxime Bernier. Eleven years have passed and there have been no follow-up reviews.

In just over a month, CRTC Chair JP Blais’ 5-year term will be up. At the same time, we are about one-and-a-half years into the mandates of the relevant Trudeau ministers, sufficient time for them to develop their own strategies for the communications sectors. The Government has been recruiting a number of new people to join the CRTC: a new Chair; a Vice-Chair for Broadcasting; and, two regional Commissioners. Change is coming to the CRTC. How much of a transformation will we see as the Government puts its mark on Canada’s communications sector?

With the significant changes in leadership coming to the CRTC, will Canada take the opportunity to have its own form of “deconstruction” at its communications regulator?

The opening speaker on June 5 at The 2017 Canadian Telecom Summit will be Navdeep Bains, Minister, Innovation, Science and Economic Development. The Regulatory Blockbuster on June 6 will be certain to discuss these issues and more.

The Canadian Telecom Summit is just 4 weeks away. Have you registered yet?