The tragedy of the commons

In an interview with the Financial Post, Commission Chair JP Blais had hinted his next big ruling — a decision on basic Internet service — will be his most disruptive yet. Earlier today, the CRTC issued Telecom Regulatory Policy CRTC 2016-496 “Modern telecommunications services – The path forward for Canada’s digital economy” [TRP 2016-496] and it is difficult to see the level of disruption.

The financial markets expressed relief with the decision, Barclays calling it ‘benign’ and Scotiabank saying ‘logic actually prevailed… the absence of retail price regulation renders this decision a “non-event” from the capital market’s perspective.’ From a consumer perspective, describing broadband as a basic service without imposing an obligation to serve creates a high likelihood that the basic service objective will not be much more than a score card bound to disappoint. The Regulatory Policy describes the former obligation as “The obligation to serve requires the incumbent local exchange carriers (ILECs) to provide telephone service to (i) existing customers, (ii) new customers requesting service where the ILECs have facilities, and (iii) new customers requesting service beyond the limits of the ILECs’ facilities.” [paragraph 3, TRP 2016-496]

Later, at paragraph 180, the obligation to serve is credited by the CRTC as having led to successful fulfillment of the voice basic service objective:

As stated earlier, there is currently near-ubiquitous access in Canada to the level of service set out in the basic service objective. As a result, the intended goal of the basic service objective has been achieved.

But, rather than impose an obligation to serve on this aggressive broadband objective, the obligation is largely being eliminated. The obligation is being replaced by financial incentive programs, an industry-funded $750M pot, starting at some undefined point in the future. This is nothing new. More than 10 years ago, the Report of the Telecom Policy Review Panel recommended “that affordable and reliable broadband services should be available in all regions of Canada by 2010.” An entire chapter of the report was dedicated to “Connectivity: Completing the Job.” Chapter 8 recalls “In 2000, the federal government set a policy goal of ensuring that broadband networks and services would be available to businesses and residents in every Canadian community.”

Recommendation 8-1
As a key part of its national ICT strategy, the federal government should

1. ensure that Canada remains a global leader in the deployment of broadband networks, and
2. immediately commence a program to ensure that affordable and reliable broadband services are available in all regions of Canada, including urban, rural and remote areas, by 2010 at the latest.

That recommendation was made more than 10 years ago. There have been hundreds of millions of dollars spent since then by successive federal and provincial programs. The CRTC got into the rural broadband subsidy business once before when it set up its Deferral Account.

A week after ISED Minister Bains announced a $500 million broadband program (“Connect to Innovate”), today’s CRTC decision sets up yet another funding program. These are taking place ten years after the report of the Telecom Policy Review Panel, 16 years after the government first set its policy goal.

The most disruptive ruling yet? Kindly excuse my cynicism. What is disruptive here?

In the hours before the policy was released, I prepared a series of Tweets on what I might consider to be disruptive regulation. They are reproduced below for your consideration over the holidays. Perhaps we’ll see more innovation in the New Year.