Mark Goldberg


Innovation and regulation

I spend a lot of time thinking about unintended consequences that emerge from telecommunications regulations.

A year ago, I wrote a piece asking “Will regulation inhibit innovation?”

That article was looking at technology solutions to deal with unsolicited calls from telemarketers. In response to a CRTC notice of consultation asking “what regulatory measures, if any, should be established,” at the time I observed, “Each time a regulatory measure is introduced, there are limits imposed on the degrees of freedom for innovation.”

Twenty years ago, permission-less innovation, sometimes in the form of spoofed calling identifiers, helped bring down the cost of delivering international long distance calls using line side connections. If caller ID had been verified, many low cost calling arrangements may not have emerged.

I continue to be troubled by the CRTC’s decision on differential pricing practices (Telecom Regulatory Policy CRTC 2017-104) issued last April. The language in the decision seems to ignore the potential for interference in service innovation. For example, the CRTC provided a specific direction, explicitly favouring certain types of innovation over others: “Rather than implementing marketing practices such as zero-rating, ISPs in the retail Internet access services market should focus on innovating by enhancing, for example, the speed, coverage, capacity, security, and reliability of their existing networks, for the benefit of Canadians.”

Early in the decision, the CRTC quoted a witness who asserted “that differential pricing practices would end the era when entrepreneurs are free to innovate without permission, which is a core net neutrality principle that has fostered innovation up until now.”

While the decision claimed to establish an ex-post complaints based regulatory regime for evaluating differential pricing innovations, it simultaneously established a regime for service providers to have the regulator pre-authorize innovations:

If an ISP is unsure as to whether a differential pricing practice would be consistent with the framework, it may file an application seeking a Commission determination prior to implementing the practice in question.

to encourage ISPs to seek a determination in advance of offering a differential pricing practice as appropriate, the Commission, in dealing with a complaint about a differential pricing practice and in accordance with its powers under section 72.003 of the Act, may consider imposing an administrative monetary penalty.

I sense an imbalance in permission-less innovation. In the early days of smart phones, differential data plans were the norm, with offers of low priced, flat rate access to popular applications intended to get people to try out mobile internet. None of these plans needed to be reviewed in advance by the regulator. We might want to consider whether any would have survived a review under the current Canadian regulatory framework. Yet, did the practice of favouring certain social media and messaging applications reduce incentives or opportunities for entrepreneurs to innovate without permission?

Hardly. These pricing practices encouraged more people to get online.

Can we do better anticipating the risks and opportunities that arise from intervention in the marketplace in order to avoid unintended consequences? Can regulators avoid the temptation to intervene and allow the marketplace to decide which business models will succeed?

How can policy makers ensure Canadians have the opportunity to derive the full benefits from innovation and disruption in an increasingly digital economy?

The theme for The 2018 Canadian Telecom Summit [June 4-6, Toronto] is “Innovation and Disruption in ICT: reinventing and securing our business and personal lives.” Save more than $200 by registering before the end of February. Why not register today?

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