Search Results for: unintended

The Don’t Lock My Freedom website purports to represent consumer interests, when it is quite possible the net effect of its advocacy will be to raise initial phone prices and long term service costs. 

An article on Cartt.ca highlights these key flaws in the overly simplistic viewpoint that appears to have motivated the proposal to require wireless service providers to unlock phones.

The organizers of the website and the legislative supporters ignore the fact that there are already lots of alternate channels for people to buy phones without locks. There are service providers who have announced that they will unlock phones for their subscribers. Thanks to on-line third party sites like Tiger Direct, anyone who wants can buy unlocked phones, even if they aren’t in major metropolitan areas. Do a search for “unlock codes” and you will find lots of options at pretty low prices.

In other words, the marketplace is working without government intervention to dictate specific business models to the service providers. Now, I know that some will argue that most phones are being bought from the wireless service providers and have contracts associated with them. Maybe that is because people like the subsidies that they are receiving? Or they appreciate the ability to call the service providers’ technical support lines and have them recognize the model number and provide help.

Michael Geist is quoted in the Cartt.ca article saying:

In certain respects, this was an odd question to even have to ask. No one would ever question whether consumers have the right to tinker with their car or to use the same television if they switch providers from cable to satellite, yet the wireless industry somehow convinced the public that unlocking their phones – consumers’ own property – was wrong.

How many people who buy a Chevy expect a Mercedes dealer to fix their transmission for free? Or vice versa? Would a Ford dealer even be expected to be able to diagnose what is wrong with your Lambourgini? Is the next private member’s bill going to force car dealers to get rid of their oil change and service departments?

The metaphor for TVs just doesn’t hold up to scrutiny at all – unless Professor Geist has figured out a way to use his Bell TV set-top box for Rogers cable service, or vice versa. Maybe that is another private member’s bill.

If a phone that was sold by Rogers is unlocked and now is getting used on the TELUS network, which customer service line should the consumer call to find out how to load a Facebook application? When the TELUS representative has to spend extra time trying to learn the menu system for a model that was never sold by them, who should pay for that call?

How many consumers will be told to take their phones back to the original store for help with the software?

Should you be able to unlock a phone is a very different question from the government dictating a specific business model that requires all phones to be unlocked. The right to unlock phones is part of the copyright reform act, Bill C-32.

The Cellular Freedom Act appears to be naively motivated and could ultimately inconvenience most consumers.

Last week, Bell and Bell Aliant filed a cabinet appeal saying that a consequence of the CRTC’s Cybersurf speed-matching decision is to discourage investment in next generation FTTN networks. That appeal is similar to one filed the evening before by TELUS. There was also an appeal filed by MTS Allstream of 2 different CRTC decisions, dealing with wholesale access to unbundled ethernet. [Links to the various decisions can be found here.]

A general concern associated with regulation is the potential for unintended consequences to arise from intervention in the marketplace. This is why it is Canada’s official policy to rely on market forces to the maximum extent feasible as the means of achieving the telecommunications policy objectives.

In his February speech to the Canadian Film and Television Production Association’s Prime Time conference, CRTC Chair Konrad von Finckenstein commented that the Commission is always particularly concerned about unintended consequences associated with its actions. Earlier this week, in the New Media proceedings, the Chair commented:

You know, we, like everybody else, avoid unintended consequences and when you just look at things through one lens, like in this case the broadcasting, you may have produced some consequence you didn’t want to because you didn’t look at the overall picture or you didn’t have jurisdiction for it.

The CRTC determination on matching speeds may have made sense through the lens of Section 27(2) of the Telecom Act:

No Canadian carrier shall, in relation to the provision of a telecommunications service or the charging of a rate for it, unjustly discriminate or give an undue or unreasonable preference toward any person, including itself, or subject any person to an undue or unreasonable disadvantage.

Keep in mind that Not all discrimination is forbidden. There is such thing as “just” discrimination.

In May 2006, the CRTC found that TbayTel had discriminated against its competitor, Superior Wireless, but its actions did not constitute ‘unjust discrimination’ under the Telecom Act. TBayTel was found to have treated the customers of Superior Wireless differently from the way it treats roaming customers of other carriers, however there was no ‘unjust’ discrimination, when considering the degree of competition in wireless services.

What constitutes a “sufficient degree of competition” in the services being examined? How can we be certain that there is an adequate measure of the degree of competition and that the statistics are reliable?

Had a similar lens been applied to examine internet services as the Commission used for mobile wireless in Decision 2006-33, would the outcome of the decisions under appeal have been the same?

It is has been about 5 years since I last wrote about regulatory arbitrage. When I have written about the subject in the past, it was in the context of telecom, with arbitragers exploiting loopholes in certain mandated rates.

However, regulatory arbitrage also applies on the broadcast side of the CRTC and it isn’t just a Canadian problem.

A recent article on the Truth on the Markets blog was written about FCC regulations in the US, but most of the article applies equally in Canada.

The article talks about differences in regulating traditional broadcasters as contrasted with unregulated streaming services. “While consumers increasingly access video content through streaming platforms subject to minimal oversight, legacy media providers continue to operate under restrictive regulatory frameworks designed for a bygone era. This regulatory asymmetry creates economic inefficiencies and distorts competition.”

Sounds familiar, right? Canadians wouldn’t know that the author, Eric Fruits of the International Center for Law and Economics, was talking about FCC regulations in this article, rather than the CRTC.

“The inefficiencies of regulatory arbitrage multiply when different services that serve similar functions—such as broadcast, cable, and streaming—are regulated under different frameworks. As technologies converge, disparities among the regimes erected to regulate those technologies become increasingly problematic.”

There are two ways to address the regulatory imbalance: one could lessen the regulatory burden on legacy broadcasters now that streaming services are in a position to discipline the market; or, one could increase the level of regulation on the streaming services. Canada has been moving toward option two – adding fees and content regulations to streaming services.

Of course, increased regulation of streaming services is bound to have a deleterious impact on innovation.

Dr. Fruits writes that regulatory arbitrage won’t improve economic welfare if it shifts investments based on regulatory considerations, rather than marketplace conditions. As an example, he cites the migration of certain premium content from broadcast and cable to streaming services being driven only partly by consumer preferences. He says it’s being influenced by the advantages of operating in the less-regulated online space.

ICLE is participating in the CRTC’s public notice, “The Path Forward – Working towards a sustainable Canadian broadcasting system” [2025-2], with a public hearing scheduled for May 12. Its submission sets out a belief that a framework emphasizing “market efficiency, competition, and regulatory proportionality supports the need for deregulation and light-touch solutions.”

As an example, ICLE looks at the 1:1 rule, which requires BDUs to distribute an independent programming service for each affiliated service carried.

With near-guaranteed carriage, independent services have less incentive to invest in marketing, production quality, or audience analytics—factors critical to organic growth. Furthermore, BDUs often pass the costs of mandatory carriage on to consumers through bundled pricing. This results in cross-subsidization, whereby popular services indirectly fund niche offerings that might otherwise fail in a competitive market.

ICLE’s “Strategic Recommendations for the CRTC” within its submission in the 2025-2 proceeding ties back to the theme of regulatory arbitrage. “The history of video-market regulation suggests that static regulatory frameworks often struggle to keep pace with dynamic markets, leading to unintended consequences. Regulations that might be appropriate given current technology and market conditions can quickly become obsolete or counterproductive as markets evolve.”

The submission concludes: “As the CRTC works toward a sustainable Canadian broadcasting system, it should take a light-touch and modest approach that acknowledges the existing dynamic and competitive video-distribution environment, and the nearly impossible task of predicting and responding to ongoing rapid technological and market advancements.”

The Truth on the Market article talks about technology bringing the end of “scarcity” in the video services business. “Policymakers and regulators evaluating competition in video markets face a seeming paradox: so many monopolies, or near-monopolies, but so much competition.” From a consumer perspective, the video services market is no longer limited to TV channels. This will clearly confound simplistic analysis by those seeking government intervention to disrupt so-called monopoly or duopoly service providers.

So many monopolies, or near-monopolies, yet so much competition.

Will the CRTC exhibit the kind of confidence required to let the system and the marketplace work with a lighter regulatory touch?

In a recent newsletter, the Canadian Anti-Monopoly Project (CAMP) delivers an overly simplistic rebuttal to Sean Speer’s plea for increased liberalization of Canada’s telecom market.

You should read both. Both pieces have their shortcomings, especially in failing to consider the impact of foreign ownership restrictions in the Broadcast Act that would also need liberalization in order to accommodate broadcast distribution licenses (such as cable TV / IPTV).

The CAMP perspective fails to acknowledge real challenges faced by facilities-based companies that invest tens of billions of dollars in digital infrastructure each year. There is a cost associated with restrictions on the sources of capital, costs that inevitably factor into the prices paid by consumers. CAMP says “Current ownership rules block foreign stakes in large incumbents precisely to prevent further consolidating market power in the sector.”

Consider an alternate scenario. As a colleague recently observed privately to me, “Shaw sold to Rogers, increasing concentration, because they didn’t have the risk tolerance for raising the capital they needed to upgrade to competitive infrastructure. Obviously an American partner would have had the capital.” Liberalized foreign ownership might have provided an alternate option for the Shaw family to exit, resulting in more competition, not less.

Would a foreign buyer have emerged? Who knows. There are so many other problems with Canada’s telecom policy framework, not the least of which are considerations I discussed last week.

But we won’t know.

Each restriction on capital investment reduces degrees of freedom. Each translates into lost opportunities.

As I have written many times, we need to look at the industry like a chess master, thinking three or four moves ahead. Anticipate consequences of each path – intended and unintended. How would foreign ownership liberalization impact jobs? Ownership of intellectual property rights? Responsiveness to rural, remote, and indigenous investment?

It is worth noting that CAMP’s newsletter includes a line, “regulatory actions have supported strong independent carriers like Sasktel”. Sasktel is hardly an independent carrier. It is the provincially owned incumbent in Saskatchewan. The new entrants in that province are Bell, Rogers and TELUS, none of which received regulatory support for market entry.

Avoid overly simplistic takes. Telecom policy requires a much more sophisticated approach.

I have frequently written about government keeping out of the way. The phrase “out of the way” appears in about 25 of my posts.

Twice, I used the same title, “Getting out of the way” [2012, 2016]. Earlier this year, in “Let the marketplace work”, I describe government policies and regulations inhibiting capital investment by the telecom sector.

So, it was with interest that I read a recent article on “The Hub”, “Want to be a more productive country, Canada? Get the government roadblocks out of the way” by Jerome Gessaroli. He says “policies relying on government intervention to replace the free market seldom produce improved growth and productivity.” His article includes 4 policy recommendations relating to government maintaining a smaller economic footprint.

Mario Draghi’s newly released report for the European Union, “The future of European competitiveness” [Part A (A competitiveness strategy for Europe) pdf, 3.4MB | Part B (In-depth analysis and recommendations) pdf, 11.5MB], cites “inconsistent and restrictive regulations” among the hindrances for innovative company growth. The report calls for reducing the regulatory burden imposed on European companies. “More than half of SMEs in Europe flag regulatory obstacles and the administrative burden as their greatest challenge.” According to the report, “Regulation is seen by more than 60% of EU companies as an obstacle to investment”.

In other words, I’m not alone in wanting government to stay out of the way.

A few years ago, I quoted Ronald Reagan’s 1986 remarks to the National White House Conference on Small Business. “Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”

That approach gives the appearance of government doing something, but rarely achieves a positive long-term outcome. It seems to be where Canada is heading with its legislation on the digital economy. The Online News Act and Online Streaming Act already drove unintended consequences, as predicted. In addition, Canada is risking a trade dispute with the US over its approach to taxing digital services.

It is so very tempting to intervene in the marketplace. It takes much stronger leadership to trust in the power of competitive markets. Look at the telecom market. Canada ensured there are 4 well-capitalized facilities-based wireless service providers operating in most of the country, including all population centres. These service providers have sufficient spectrum and technology to compete in both mobile and fixed markets.

Continued regulatory intervention in the marketplace threatens to return Canadian telecom to the haphazard Calvinball era of a decade ago. Such an environment discourages investment, precisely the opposite of what is needed to drive productivity.

Government needs to try a new approach. Stand aside.