Over the holidays, the impact of political influences on telecom markets came to the forefront. Telecom Policy published a paper, Perspectives on political influences on changes in telecommunications and internet economy markets.
In addition, in early November, there was an appeal filed with Cabinet [pdf, 221KB] by an interesting coalition of interests: Eastlink, CNOC, Cogeco and SaskTel. What I foundĀ most intriguing wasn’t the eclectic mix of interests represented by the petitioners. Rather, it was that the petition was submitted as “a precautionary filing in the event that the [CRTC]Ā does not vary Telecom Regulatory Policy 2024-180”. From a purely procedural standpoint, I don’t really understand why the coalitionĀ didn’t wait for the outcome of the CRTC rulingĀ on the petitioners’ Review and Vary applications.
The petition was filed under Section 12(1) of the Telecom Act:
12 (1) Within one year after a decision by the Commission, the Governor in Council may, on petition in writing presented to the Governor in Council within ninety days after the decision, or on the Governor in Councilās own motion, by order, vary or rescind the decision or refer it back to the Commission for reconsideration of all or a portion of it.
The plain language of Section 12(1) uses the phrases “after a decision” and “after the decision”. I don’t see a provision in the Telecom Act for a Minority Report type of pre-cog filing with Cabinet in anticipation of a CRTC decision going the wrong way. Procedurally, the petitioners seem to be asking for political intervention in the form of a Cabinet review of a decision that has yet to been made.
The submissions in response to the petition were due on Monday (January 13). I’ll consider more on this file in a future post.
The Telecom Policy paper resonated with me. The paper’s abstract opens with “For the past thirty years, international consensus has supported telecommunications policies favoring the pursuit of economic efficiency and the distancing of governments from ownership and day-to-day industry governance.”
I think back to my own experience in the telecom industry. I moved to the US 41 years ago, in January of 1984, just a month after the break-up of AT&T and the old Bell System. At the time, Bell Canada and Northern Telecom won a contract to help General Motors leverage the newly competitive US telecom marketplace. I returned to Canada five and a half years later to work on convincing the CRTC to open up competition in Canadian telecom. Long distance competition was approved in 1992 and other sectors opened up in 1994. The UK and Australian telecom markets were opening up as well. So, the 30 year timeline set out in the paper fits. An interesting side note: in Canada, our team from the private sector had to make the case that competition was good. The regulator needed to be convinced.
The intensity of political influences on the telecom market has varied greatly over the past 3 decades. Like a pendulum, it swings between extremes, apparently unable to reach a consistent equilibrium. This is not just a Canadian phenomenon.
As I highlighted last week, Prime Minister Starmer, the business secretary, and the Chancellor reportedly wrote regulators, seeking a lighter touch in order to help stimulate the economy. “Sky News has learnt that the prime minister wrote to more than ten regulators – including Ofgem, Ofwat, the Financial Conduct Authority and the Competition and Markets Authority – on Christmas Eve to demand they submit a range of pro-growth initiatives to Downing Street by the middle of January.” Ofcom – the UK parallel of Canada’s CRTC – was also reported to have received the letter, which was “unambiguous in its direction to regulators to prioritise growth and investment.”
The message was clear. The Prime Minister wants regulators to consider growth instead of just risk, “ensuring that regulation does not unnecessarily hold back investment and good jobs in the UK.” Regulators were asked to identify barriers to economic growth that could be removed by the government. Regulators were to report on which “regulatory objectives were either conflicting or confused.”
The Telecom Policy paper confirms “both the persistence of regulation and its ability to expand into all areas of the digital economy, and a disconnection of regulation from the original intentions to promote more competitive markets.”
When policies are formed and decided at the ballot box by comparatively poorly-informed voters and politicians, rather than better-informed regulators and policy experts, a risk exists that inappropriate laws, rules and policies will prevail, and the desired outcome (of economic efficiency in the sector) will be made harder to obtain.
A recent trend towards populist policies in national and local elections appears, in some countries, to be expanding from telecommunications to the information economy sector.
The paper also notes that political influences are now moving beyond economic matters, as governments seek to become actively involved in the moderation of internet content. Canada’s controversial Online Harms Act was another legislative victim of last week’s prorogation of Parliament.
Recall, last summer I wrote about online platform accountability. That piece looked at a paper proposing an alternative to direct government regulation of content.
The Telecom Policy researchers found that political initiatives are rarely supported by reasoned economic, legal or social analysis of their likely benefits and detriments. Resorting to political interventions (rather than using a regulatory consultative process) was possibly because the desired outcome may not be supported by an independent analysis conducted by the relevant regulatory agencies.
Last week, the International Center for Law and Economics filed a submission with Canada’s Competition Bureau in response to the Bureau’s consultation reviewing the merger enforcement guidelines. The ICLE paper echoes precisely this concern. “The Bills introduced changes to Canadian competition law that are, in our view, severely misguided. The most problematic of these changes are encoding structural presumptions in the Competition Act and jettisoning the efficiency exemption in merger review. In our view, these changes signal a worrying turn away from sound economic analysis and toward formalistic line-drawing based on market structure.”
I can think of a number of addenda to Canada’s Telecom Act over the past few years supporting such a thesis. Refer to my post last month for an example of one such “political initiative.”
Be sure to check out the Telecom Policy paper.
We will want to monitor progress on Prime Minister Starmer’s “regulating for growth” initiative. Will any of the Canadian political parties adopt such an approach in their 2025 election campaign platforms?